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Financial Deepening and Nominal Output Dynamics in Nigeria: Evidence from Quarterly Digital Payments and Private-Sector Credit

Samuel Chukwuyem Okojere

Abstract

This study examines the relationship between financial deepening and output in Nigeria using 56 quarterly observations from 2012Q1 to 2025Q4. The supplied dataset contains current-value naira series for gross domestic product , Point-of-Sale transactions, mobile payments, and credit to the private sector . Consequently, the dependent variable measures nominal output rather than real economic growth. All series were transformed into natural logarithms. Seasonal augmented Dickey-Fuller tests show that the four log-level series are non- stationary but become stationary after first differencing. A stationary seasonal distributed-lag model was therefore estimated in quarterly log changes, with lagged financial variables, a four- quarter output-growth term, quarterly effects, a trend, a COVID-19 intervention dummy, and a 2025Q1 data-discontinuity control. Newey-West heteroskedasticity- and autocorrelation- consistent standard errors were used. Lagged POS growth, mobile-payment growth, and CPS growth are individually insignificant, and they are jointly insignificant (F = 0.769, p = 0.518). The results do not support the earlier claim that the three financial-deepening indicators exert positive and significant short-run and long-run effects on economic growth. A defensible real- growth analysis requires real GDP and consistently deflated financial variables.

Keywords

financial deepening; nominal GDP; Point-of-Sale transactions; mobile payments; private-sector credit; Nigeria JEL classification: E44; G21; O16; O40

References

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