Financial Deepening and Economic Growth in Nigeria, 1986-2011: An Empirical Investigation
OHWOFASA, Bright Onoriode; AIYEDOGBON, John Olu-Coris
Journal of Economics and Development Studies, 1(1), pp. 24-42.

Abstract
The paper assessed the level of development of financial deepening in the banking sector and the extent it has impacted on economic growth over the last two decades. Vector autoregressive (VAR) methodology and its derivatives, impulse response function and variance decomposition, were employed that enable us to scrutinize the relationship between financial deepening and economic growth. The findings show that the series are co-integrated and that long run relationship existed between the variables. The results of the VAR estimates revealed among other things that a one year lag of economic growth, gross national saving as a ratio of GDP (lag 1) and exchange rate (lag 1) have significant positive impact on current economic growth while the impact of GCF (lag 1) on the current level of economic growth was negative and statistically significant. It was also empirically discovered that PSC/GDP (lag 2) and GNS/GDP (lag 2) happened to be key determinants of M2/GDP. Similarly, the key determinants of PSC/GDP include its year 1 and 2 lagged values and GNS/GDP (lag 2) with GNS/GDP (lag 2) and PSC/GDP (lag 2) exhibiting negative impact. Finally, on the current level of GNS/GDP, it is observed that M2/GDP (lag 1) and PSC/GDP (lag 2) exhibit significantly negative determining influence while PSC/GDP (lag 1) and the past value of GNS/GDP (lag 2) were also seen as its key determinant. These findings are further corroborated by the results of the impulse response function and variance decomposition. Among the recommendations of the study are that savings should be stimulated in order to place more funds in the hands of banks to intermediate investors seeking funds. Also, lending rate should be reasonable so as not to deter investors to borrow to embark on viable investment projects.

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OHWOFASA, Bright Onoriode., & AIYEDOGBON, John Olu-Coris.(2013). Financial Deepening and Economic Growth in Nigeria, 1986-2011: An Empirical Investigation. Journal of Economics and Development Studies, 1(1), pp. 24-42.

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B.O. Ohwofasa holds his B.Sc and M.Sc degrees from the prestageous Ahmadu Bello University, Zaria - Nigeria and his Ph.D disertation titlled An Analysis of Export Earnings Instabilityin Nigeria, 1980-2011: Implication for the Stability of Fiscal and Monetary Policies is currently awaiting defence at the same university. His research interest spans public finance, development and monetary economics and consequently has published over twenty scholarly articles in learned journals. The author is currently a lecturer of economics at the Delta State Polytechnic, Otefe-Oghara-Nigeria.

JOHN OLU-CORIS AIYEDOGBON obtained his Ph.D degree in Economics from the Nigerian Defence Academy, Kaduna Nigeria. He has his M.Sc and B.Sc Economics at A.B.U. Zaria and University of Ilorin respectively. He specializes in Public Finance and Development Economics and thus has authored over twenty five scholarly articles in learned journals. He has taught various courses in tertiary institutions in Nigeria.