FINANCIAL DEEPENING AND ECONOMIC EMPOWERMENT IN NIGERIA

Abstract

Financial deepening is to improve economic conditions through increased competitive
efficiency within financial markets thereby indirectly benefiting non-financial sectors of the
economy. The main objective of the study was to examine financial deepening and economic
empowerment in Nigeria. The specific objectives were to examine the impact of money supply
to gross domestic product (MS/GDP) on economic empowerment in Nigeria, ascertain if private
sector credit to GDP ratio has any significant effect on economic empowerment in Nigeria,
examine if the level of financial savings to GDP ratio has significantly impacted on economic
empowerment in Nigeria and ascertain the effect of inflation rate on economic empowerment in
Nigeria. The study employs secondary data extracted from the Central Bank of Nigerian
statistical bulletin of 2017 and the World Bank 2017 World Bank development indicators. The
methods of data analyses include the co-integration technique and the error correction
mechanism (ECM) on a time series data covering the period of 1986-2017. The findings of the
study are that the ratio of money supply to GDP has a negative relationship with per capita
income (PCI) both in the short run and long-run with the long-run money supply to GDP being
statistically significant, Private sector credit to GDP has a negative but not statistically
significant impact on PCI in the short-run whereas private sector credit to GDP has a positive
but not statistically significant impact on PCI in the long-run. Financial savings to GDP has a
negative relationship with PCI both in the short-run and long-run with the short-run
relationship being statistically significant and Inflation rate has a positive and a statistically
significant impact on PCI both in the short-run and long-run. A major recommendation of the
study is that, for the Nigerian economy to grow at the desired rate, the indices of financial
deepening such as private sector credit to GDP and financial savings to GDP should receive
considerable attention by relevant authorities in order to impact strongly and positively on
economic empowerment