Impact of Financial Intermediation on Performance of the Nigerian Economy (1990 - 2015)

Abstract

This study investigated the impact of financial intermediation on performance of the Nigerian economy with specific objectives, which include to (i) determine the impact of financial intermediation on gross domestic product in Nigeria, (ii) examine the impact of financial intermediation on inflation rate in Nigerian, and (iii) assess the impact of financial intermediation on unemployment rate in Nigeria. Net domestic credit was adopted as the independent variable and proxy for financial intermediation while gross domestic product, inflation rate and unemployment rate served as dependent variables and proxies for economic performance indicators. The study covers 1990 to 2015. The researcher adopted ex-post facto and analytical research designs. Ordinary Least Square (OLS) regression technique was used in analysis aided by E-views statistical package and the model was estimated at 5% level of significance. The results of the stationarity tests showed that the data are stationary at first difference. The regression results showed that (i) net domestic credit had positive and significant impact on gross domestic product in Nigeria within the period under review, (ii) net domestic credit had negative and significant impact on inflation rate in Nigeria, and (iii) net domestic credit had positive and significant impact on unemployment rate in Nigeria. Based on the results from the analysis, the researcher recommends that (i) Government, through the monetary authorities should ensure easy access to credit facilities especially to the real sectors of the economy to sustain economic growth, (ii) Regulatory authorities should always maintain efficient monetary policy framework to regulate the stock of money in order to control inflation, (iii) Various government credits scheme to small and medium enterprise should be resuscitated to create more employment opportunities, and (iii) Government should always sustain the economic policies of their predecessors aimed at reducing unemployment rate in the economy. The study contributes to the existing literature, modified models and utilized data up 2015 as well recommends for further studies.