Bank Intermediation and Economic Growth in Nigeria

Abstract

The study is carried out to examine the macroeconomic determinants of bank intermediation and to explore its contribution to the growth of the Nigerian economy, using secondarily sourced time series data spanning from 1970 to 2004. From the available literature reviewed, it was explicit that the results obtained from cross-country studies are not able to address this issue satisfactorily and highlight the importance of country-specific studies. The time series study based on the Distributed Lag Method of Cointegration (DL-ECM) and Regression Analysis finds firm and colossal evidence suggesting that some form of financial determinants like ratio of Liquid liabilities to GDP, Domestic Credit to the Private Sector relative to GDP, Branch expansion of deposit money banks (DMBs) and Interest Rate Spread as well as macroeconomic variables such as inflation, investment and trade openness has indeed contributed to bank intermediation and economic growth. This study drew the conclusion that better bank intermediation has a distinct significant positive impact on intermediation financial development leads to economic growth. in the context of the empirical findings above, the researcher advanced several recommendations for policy.

Keywords: Deposit, Money, Bank, Intermediation, Economy, Growth

JEL Classification: G21