Financial Development and Economic Growth in Nigeria: Evidence from Threshold Modelling

Economic Analysis and Policy, Volume 47, September 2015, Pages 11-2

Posted: 13 Dec 2019

See all articles by Dr. Olusegun A. Omisakin

Dr. Olusegun A. Omisakin

The Nigerian Economic Summit Group (NESG); Independent

Mutiu Abimbola Oyinlola

University of Ibadan - Department of Economics

Festus Egwaikhide

University of Ibadan - Faculty of Public Health

Oluwatosin Adeniyi

University of Ibadan - Faculty of Public Health

Date Written: September 27, 2015

Abstract

This paper re-examined the relationship between financial development and economic growth in Nigeria. Unlike existing studies, we attempted to assess the information content of non-linearities in the finance–growth nexus for Nigeria. We also attempted to inventively gauge the impact of financial reforms on the Nigerian economy particularly in terms of economic growth. Using annual data covering the period 1960–2010, we factored in threshold effects through financial development (FD) measures. Following these, we unearth a number of interesting results. First, financial development negatively impacted growth but a sign reversal resulted in accounting for threshold-type effects. This is indicative of some turning points in the finance–growth association. Second, using a composite index of FD led to a similar outcome. Third, on the heels of sample splitting, the coefficients for the pre- and post-reform era are hardly distinguishable casting doubt on the efficacy of financial system reforms. On the basis of the foregoing, broader structural reforms should pervade Nigeria’s policy space if the aim of sustained, inclusive and employment-generating growth is to be ​realized.

Keywords: Financial development, Economic growth, Non-linearities, Nigeria

JEL Classification: O16; E44; F36; G28

Suggested Citation

Omisakin, Olusegun A. and Omisakin, Olusegun A. and Oyinlola, Mutiu Abimbola and Egwaikhide, Festus and Adeniyi, Oluwatosin, Financial Development and Economic Growth in Nigeria: Evidence from Threshold Modelling (September 27, 2015). Economic Analysis and Policy, Volume 47, September 2015, Pages 11-2, Available at SSRN: https://ssrn.com/abstract=3494275

Olusegun A. Omisakin

The Nigerian Economic Summit Group (NESG) ( email )

The Summit House,
6, Oba Elegunshi Street
Ikoyi, Lagos, 234
Nigeria

HOME PAGE: http://www.olusegunomisakin.com

Independent ( email )

Mutiu Abimbola Oyinlola

University of Ibadan - Department of Economics ( email )

Department of Economics
Ibadan, OK Oyo State 900001
Nigeria

Festus Egwaikhide

University of Ibadan - Faculty of Public Health ( email )

University of Ibadan
Ibadan, OR Oyo Stase 10001
Nigeria

Oluwatosin Adeniyi (Contact Author)

University of Ibadan - Faculty of Public Health ( email )

University of Ibadan
Ibadan, OR Oyo Stase 10001
Nigeria

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