FINANCIAL SECTOR REFORM AND ECONIMIC GROWTH IN NIGERIA: AN ECONOMETRIC APPROACH

The nexus between financial sector reforms and Nigeria’s economic performance is examined. Annual data for the period from 1981 to 2018 is used, and the impact of credit issued to the private sector on the economic growth in Nigeria is examined. The influence of market capitalization on economic growth in Nigeria is evaluated, the relationship between money supply to GDP and economic growth is determined, and lastly, the relationship between the exchange rate and economic growth in Nigeria is examined. The results of the Augmented Dickey-Fuller test show that the order of integration of the variables is I(1) and I(0), respectively. An Autoregressive Distributed Lag (ARDL) model was used because it suits the result of the preliminary test. A cointegration test among the variables was carried out using the ARDL bound test approach. The ARDL estimates reveal that market capitalization positively and significantly affects or influences economic performance in the long run, while credit supply to the private sector (financial deepening) positively and significantly influences Nigeria’s economic performance in the short run. The findings further show that Nigeria’s economy fails to converge whenever there is disequilibrium. The recommendation is made that, since capital market reforms appear to have a significant positive effect on the economy in the long run, the government should continue with the implementation of the necessary reforms in the Nigerian capital market and the financial sector in general for the betterment of Nigeria’s economy.