Financial Development Nexus on Economic Growth in Nigeria

Financial system development entails advancement in the magnitude, competence and steadiness of monetary markets alongside manifold benefits for the economy. However, these gains are not visible in the growth process of Nigeria, hence, the examination of financial development’s effect on economic growth in Nigeria from 1981 to 2020. Domestic credit to private sector (DCD), broad money supply (BMS), inflation (INF) and trade openness (TOP) were the independent variable while the dependent variable is growth rate in gross domestic product (GDP). Auto-Regressive Distributed Lag (ARDL) model result of the error correction term points to 96% upturn after a year’s disequilibrium. The long run result showed a positive and insignificant interconnection involving domestic credit to private sector and growth rate in gross domestic product, but a negative and significant connection, between broad money supply and inflation rate. Conclusion is that, a facilitator for economic growth is financial development; while proper and appropriate monetary policies and strategies that would attract investors is recommended, for increasing capital inflow and investments, and consequently enhancing the level developmental growth in Nigeria.