Financial Market Integration and Economic Growth: An Experience from Nigeria

This study examines the effect of financial integration on economic growth in Nigeria. Using time series data from 1981 and 2012, the study employs autoregressive distributed lag (ARDL) bounds testing approach proposed by Pesaran et al., (2001) to estimate the long run and short run effect of financial integration and development on economic growth. The result from cointegration test showed presence of long run relationship between dependent and all explanatory variables. The regression results show that, while financial integration has no short run effect on economic growth, its long run effect on growth is negative and significant.  Financial development was found to have both short run and long run positive effect on economic growth in Nigeria.  Hence, for Nigeria to benefit from financial integration, the government has to increase the level of competition, improve the quality of financial information and reduce corruption in the financial system.