AN EVALUATION OF FINANCIAL DEVELOPMENT AND ECONOMIC GROWTH OF NIGERIA: A CAUSALITY TEST

Abstract

The study investigates the impact of financial development variables on economic growth Nigeria. To achieve the objective of this study, data was collected from secondary sources and various econometric analysis such as Augmented Dickey Fuller (ADF) test, Granger Causality test, Co-integration and Error Correction Method (ECM) were employed on time series data from 1960-2008 and the results revealed Money Supply (MS) and Credit to Private Sector (CPS) are positively related to economic growth of Nigeria. The Johnsen and Granger tests shows Money Supply and Credit to private Sector (CPS) are cointegrated with GDP in Nigeria within the study period and the Granger tests indicated that all the exogenous variables Granger cause GDP and GDP Granger cause other variables in Nigeria. The paper concludes that the government should ensure a robust supervision of the financial sector to enable financial institutions provide the needed funds for the growth and development of the Nigerian Economy.