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Financial Deepening and Economic Growth in Nigeria

Ajie, Hycenth Amakiri, Joshua, Nehemiah Bobai

Abstract

This study examined the effect of financial deepening on economic growth in Nigeria between 1986- 2024. It applied descriptive statistics, Augmented Dickey Fuller and ARDL on time series data sourced from Central Bank of Nigeria Statistical Bulletin CBN, 2025) and International Monetary Fund (IMF, 2025). The ADF unit root test result indicated mixed order of integration which necessitated the choice of ARDL technique of analysis. In addition, the Bounds test for the Autoregressive Distributed Lag model revealed that the variables exhibited a long-run relationship. Moreover, the Error Correction Mechanism revealed the speed of adjustment from short-run to long-run convergence. Thus, the coefficient of -0.62 implied that in 1 year 6 Months the deviation among the variables studied will converge back to an equilibrium path. On the long-run, this study revealed that there is positive relationship between financial deepening and economic growth and it statistically significant while interest rate had negative effect on economic growth and statistically insignificant. On the short-run dynamism, this study indicated that the effect of financial deepening on economic growth was positive but it statistically insignificant while interest rate has negative effect and statistically significant in the model. This study concluded that the effect of financial deepening on economic growth in Nigeria is positive and statistically significant in the long-run. Hence, the study recommended among other that the federal government and stakeholder should implement technology adoption policies on financial institutions for inclusive economic growth in Nigeria.

Keywords

Financial DeepeningEconomic GrowthFinancial InclusionFinancial Development IndexARDL

References

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