Effect of Financial Deepening on Economic Growth in Nigeria: A Time Series Appraisal (1986-2018)

The influence of financial deepening on the economic growth of any nation cannot be underestimated. To this end, the study evaluated the effect of financial deepening on economic growth in Nigeria over a period of thirty three (33) years: 1986 to 2018. Data were collected from statistical bulletins of the Central Bank of Nigeria (CBN) and factbooks of the Nigerian Stock Exchange (NSE). The model estimation followed the Auto-regressive Distributive Lag (ARDL) approach with the effect estimated in line with the Granger Causality analysis. We found that economic growth in Nigeria is not affected by financial deepening. The study also stated that the level of growth in the economy is what influences the level of development in the banking sector. The implication is that the Central Bank of Nigeria and the Security and Exchange Commission (SEC) should formulate and implement policies geared toward the deepening of the banking sector and the capital markets to help in the efficient and effective mobilization of resources to accelerate the growth of the Nigerian economy. The insurance sector should not be left out in this regard even though citizens seem not to embrace the need for insurance policies. Impediments to the competition in the banking, insurance and capital market activities should be removed by strict legislation in line with international best practices and participants in the markets be protected as well.