Impact of financial intermediation on economic growth in Nigeria
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Date
2017
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Publisher
The Department of Business Administration, University of Ilorin, Ilorin, Nigeria
Abstract
Financial intermediation underscores the catalytic role of banks in economic growth and development of any nation. This is because financial intermediaries such as banks arise to alleviate market frictions like transaction costs, uncertainty about project outcomes and information asymmetries in their effort to mobilize funds and channel same to the most productive unit of the economy. However, the question of whether it is the size/volume or efficiency of financial intermediation that matters for the growth of developing economies like Nigeria. Data were obtained from CBN statistical bulletin and analyzed using Ordinary Least Square (OLS) regression technique. The study found that all the intermediation variables expect credit to private sector and reserve money positively and significantly related to GDP at 5% level of significance. It was concluded that both the size and efficiency of financial intermediation are necessary for the growth of Nigerian economy. The study recommends that deposit money banks should improve their monitoring of private sector credit for effective utilization; and that CBN should pursue monetary policy measures that will further the depth of the banking sector so as to allow more financial inclusion, foster healthy competition within the industry and ensure efficient intermediation.
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Keywords
Banking, Financial intermdiation, Growth, Nigeria