Financial Intermediation and Economic Growth in Nigeria ,1988 - 2013: A Vector Error Correction Investigation

Abstract

The study examined the relationship between financial intermediation and economic growth in Nigeria using data spanning (1988-2013). Secondary data was collected from the CBN statistical bulletin and national bureau of Statistics. Hypotheses were formulated and tested using vector error correction model and the test for stationarity proves that the variables are integrated in the order which implies that unit roots do not exist among the variables. There is also long-run equilibrium relationship between economic growth and financial intermediation and the result also confirms about 96% short-run adjustment speed from long-run disequilibrium. The coefficient of determination indicates that about 89% of the variations in economic growth are explained by changes in financial intermediation variables in Nigeria. The study therefore recommends that the monetary authorities should properly control and regulate the activities of the intermediations in order to achieve a sound financial system in the country, and finally, efforts should be made by monetary authorities to check mate banks from possessing excess liquidity that would ensure the prevention of inflation in the economy.

DOI: 10.5901/mjss.2014.v5n17p19