Impact of financial intermediaries on economic growth

Abstract

This study investigates the impact of financial intermediaries on economic growth in Nigeria between 1986 and 2017. The study uses Gross Domestic Product as the dependent variable and also used Money Supply (MS), Credit to Private Sector, Lending Rate (LR) and Total Credit (TC) as independent variables coupled with the use of Auto Regressive Distributed Lag (ARDL) model as method of analysis. The result revealed that only money supply is statistically significant with economic growth in both the short run and long run. However, Credit to Private Sector, Lending Rate and Total Credit assert a negative effect on economic growth while money supply has positive effect on economic growth. Also, the granger causality test shows a unidirectional causality from GDP to both CPS and TC also from MS to GDP. Meanwhile, the direction of causality is inconclusive between LR and GDP. Hence, through the preponderance of empirical proofs from various places around the world and the findings of this study, it can be inferred that financial intermediaries have a significant impact on economic growth. The study therefore, recommends that the financial intermediaries should properly monitor credit provide to sectors in the economy in other to ensure that these sectors profitably use such credit to boost the economy.