FINANCIAL SYSTEM CONTRIBUTION ON THE DEVELOPMENT OF NIGERIAN ECONOMY

Abstract

This study investigated the role of the financial system in the development of the Nigerian economy between 2000 and 2023. The study focused on stock market capitalization, credit to the private sector, and financial depth, while Real Gross Domestic Product (RGDP) was used as the measure of economic development. An ex-post facto research design was employed, using annual secondary data obtained from relevant economic and financial sources. The Autoregressive Distributed Lag (ARDL) technique was used to determine the short-run and long-run effects of the financial system indicators on RGDP. The results showed that stock market capitalization exerted a positive and significant effect on RGDP in the short run but a negative and insignificant effect in the long run. Credit to the private sector had a negative and significant short-run effect but a positive and insignificant long-run effect. Financial depth also recorded a positive and significant short-run effect, while its long-run effect was positive but insignificant. The study concludes that the financial system supports economic activities in the short term, but its contribution to sustained economic development remains limited. It recommends improved financial intermediation, easier access to affordable credit, stronger capital market development, and wider financial inclusion to enhance the long-term contribution of the financial system to Nigeria’s economic development.