Economic Growth and Financial Deepening – A Case Study of Nigeria

The study examined Economic Growth and Financial Deepening – A Case Study of Nigeria. The study employed the Variance Inflation Factor (VIF) to test the presence of multicollinearity in the model, Augmented Dicky Fuller (ADF) unit root test to check the stationarity of the variables, the Error Correction Mechanism (ECM) was used to estimate the model established, and the Pairwise Granger Causality test to check the existence of causality among the dependent and independent variables. The result of the study of cointegration and equilibrium test of Economic Growth and Financial Deepening shows generally, a long run cointegration between economic growth and financial deepening. However, further study of the relationship shows that money supply shows a significant relationship with economic growth, while credit to private sector shows insignificant relationship with economic growth. Furthermore, there is no significant causal relationship between credit to private sector and gross domestic product, while there is an existence of bi-directional causality between money supply and gross domestic product. The implication of this is that money supply as it can cause economic growth and vice versa, while credit to private sector does not have any impact on economic growth