FINANCIAL DEEPENING AND ECONOMIC GROWTH IN NIGERIA

The study evaluated the nature of the long-term relationship between financial deepening and economic growth in Nigeria over the period of 1981 to 2020. The study employed the stationarity test, the co-integration test, the error correction model, and the granger causality model. All variables were stationary at the second difference; the co-integration test indicates a long-run relationship as an inferential statistical tool. The study identified in the Error Correction Model (ECM) test that; amongst the variables employed for this study, only the equity market showed a positive and significant influence on the output level in Nigeria. In light of the findings, the study concluded that only the equity market can positively predict Nigeria’s gross domestic product. Furthermore, Gross Domestic Product (GDP) significantly promotes credit to the private sector and the equity market. The study recommends that government and financial institutions should set aside some percentages of their loanable funds to allocate to the productive and private sector, to improve the economy through job creation and proactive campaigns on the availability of credit facilities to the private sector and entrepreneurship activities. Government should provide infrastructural facilities in the country for ease of doing business. Finally, a reduction in interest rates should be encouraged to motivate borrowers