THE EFFECT OF FINANCIAL PERFORMANCE BANKING SECTOR ON ECONOMY GROWTH IN NIGERIA

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ABSTRACT

We investigate the effect of financial sector development on the economic growth of Nigeria with secondary data covering the period 1981 to 2013. This study is anchored on the need to fill the gap occasioned by the dearth of literature on this subject-matter, especially as it concerns Nigeria. We employ the Dickey Fuller unit root test to confirm the stationarity of the variables involved and ordinary least squares technique to determine the extent to which other variables impact on economic growth. The multiple regression results show that money supply, minimum rediscount rate and exchange rate have positive and insignificant effect on economic growth. On the other hand, banking sector credit, credit to the private sector, market capitalization and foreign direct investment discovered to be having negative and insignificant effect on economic growth. The study recommends that governments should evolve policies in favour of making the financial sector of their economies more efficient.  

Keywords: Economic Growth, Nigeria, Banking Sector Credit, Money Supply, Marginal Rediscount Rate, Market Capitalization, Exchange Rate, Foreign Direct Investment.