The nigerian financial system also consists of interrelationships among the persons and the bodies that make up the economy. Therefore, there is a growing concern as to whether the cost of financial intermediation is having commensurate beneficial implication on economic growth in nigeria. This study seeks to contribute to the body of literature by examining the effect of financial intermediation on economic development in nigeria. Review of related literature concept and nature of financial intermediation. The output of our empirical analysis reflect that all the data used in the process of research are stationary after first differencing in the order of 1 1, the output of the ols shows that m2 and iir has a positive and. At the present time the only important secondary financial intermediaries are sales finance, personal finance, factoring, and mortgage companies, all of which obtain most of their. This paper examines the linkage between finance companies intermediation functions and economic growth in nigeria. Its contents may not otherwise be disctosed without world bank.
Globally, activities of banks reflect their unique role as the engine of financial growth which can ultimately lead to real economic growth. A number of intermediationenvironmental models were constructed and estimated against annual nigerian data from 1970 to 2000. This report examines the sources of financial growth since the 197374 oil boom. The role of nonbank financial institution towards financial intermediation process in nigeria is not fully noticed. Mandel, and lindsay mollineaux 3 regulations role in bank changes peter olson 21 the rise of the originatetodistribute model and the role of banks in financial intermediation vitaly m.
This longrun effect is examined using the johansen cointegration estimation technique, which is a more advanced technique compared to the techniques used in. The role of financial intermediation has been exemplified in numerous literatures of finance. Commercial banks are the most relevant financial institutions in nigeria to encourage and mobilize savings and also channel savings into productive investment units. Department of banking and finance, covenant university, ota, nigeria. Introduction hile the term the great recession has been loosely applied to almost every economic downturn in the past twenty years, the crisis of 200709 hasmore than most recessionslived up to that name. This paper uses unique bankbybank balance sheet and income statement information to investigate the intermediation efficiency in the nigerian preconsolidated banking sector during 20002005. They are designed to account for institutions which take deposits or issue. This study examines the long run and short run dynamics between financial intermediation development and economic growth in nigeria using annual time series data spanning the period 19702015 by employing the var testing approach, johansen co integration testing technique and engle and granger causality test.
Financial intermediation and economic development in nigeria 9795 words 40 pages abstract financial intermediation is an important activity in the economy because it allows funds to be channeled from people who might otherwise not put them to productive use to people who will ultimately put the funds to productive uses. Financial intermediation in the preconsolidated banking. This paper seeks to examine the impact of intermediation roles of deposit money banks on the performance of the real sectors in nigeria from 1991 to 2015. The research design adopted in this study was expost facto, that is, the use of secondary data. This questions the effectiveness of the intermediation process. Financial intermediation and economic growth in nigeria. The researcher obtained from the central bank of nigeria cbn. Using an annual time series data spanning the period of 1992 2014 with the application of the estimation techniques of ordinary least square ols, co integration test, alongside granger causality test. Since high level of financial intermediation has been associated with high degree of economic development e. Nigeria financial intermediation english the world bank. The results indicate that there is a presence of long run equilibrium between. D, hcib department of accountingfinance, faculty of management and social sciences godfrey okoye university, enugu abstract. Pdf this study examined the effect of financial intermediation on development of the economy of nigeria using data spanning 1986 to 2017.
The objective of this study to establish the extent of financial intermediation in nigeria and the likely effect on economic development. Mandel, and lindsay mollineaux 3 regulations role in bank changes peter olson 21 the rise of the originatetodistribute model and the role of banks in financial. It is against this background that we assess the effect of nonbank financial institutions on financial intermediation process as well as the long run relationship between non bank financial institutions and financial. Financial intermediaries in the american economy since 1900 volume authoreditor. Pdf effect of financial intermediation on economic. An alternative approach of financial intermediation is unfolded in section 6. The nigeria financial system include banks, capital markets, insurance, pension asset managers and other financial institutions with the central bank as the apex institution. According to central bank of nigeria 2008 at the end of 2008, there were 805 financial institutions in nigeria including banks. Abstract the paper empirically investigates the extent to which environmental factors affect the intermediation performance of the financial superstructure in nigeria. This means that there is significant and positive effect of financial intermediation on economic growth in nigeria. I trace the origin of trade from the primitive barter system to its evolution through money to the dominant economic system of capitalism and the role of financial intermediation in such a system. In section 7, we present the main building blocks for an alternative theory of financial intermediation that aims at understanding and explaining the behavior of reallife financial intermediaries.
Judging by the output of this research, it show that in the nigeria context, economic growth determine financial sector development. Financial intermediation and economic development in nigeria 9795 words 40 pages abstract financial intermediation is an important activity in the economy because it allows funds to be channeled from people who might otherwise not put them to productive use to. Ascertain influence of various macroeconomic financial indicators like financial intermediation, commercial bank credits, bank lending rate, exchange rate, monetary policy rate and bank interest rate on. Ascertain influence of various macroeconomic financial indicators like financial intermediation, commercial bank credits, bank lending rate. Financial intermediation in nigeria february 15, 1983 western africa region country programs department i for official use only document of the world bank this document has a restricted distribution and may be used by recipients only in the performance of their official duties. On the whole only 48 percent variation in growth of the nigerian economy is determined by financial intermediation during the period of study implying that financial intermediation is weak in stimulating investment and growth of the nigerian economy during the period of study. Financial intermediation in the preconsolidated banking sector in nigeria heiko hesse world bank abstract. Nigeria economy in the long run while the var result shows that both indicators of financial intermediation development. For the analysis, the unit root test and cointegration test. This study examined the effect of financial intermediation on economic growth. Impact of financial intermediation on nigeria economic growth chapter one introduction 1.
Thus, improved financial intermediation, especially through banking institutions, would not only help bridge the gap between domestic saving and investment in nigeria, but more importantly facilitate trade and capital formation. The intermediation functions of finance companies and. Chapter17 financialintermediation inthischapterweconsidertheproblemofhowtotransportcapitalfromagentswhodonot wishtouseitdirectlyinproductiontothosewhodo. However, little interest has been devoted to african countries, and specifically, to west african countries. The role of financial intermediation in the growth process of nigerian economy the book analyses the role financial intermediation plays in the economic growth of nigeria. World bank, africa region, financial sector division, 2007 ocolc647051888.
This suggest that financial intermediation activities in nigeria is demand following while the economy is leading. Secondary data for the study was obtained from central bank of nigeria. The study employed the autoregressive distributed lag ardl approach to cointegration to estimate a set of four models with a view to examining the impact of ecowas integration on financial intermediation in nigeria, which was differentiated by type of financial development indicators fd used as dependent variable in the different models. Introduction hile the term the great recession has been loosely applied to almost every economic downturn in the past twenty years, the crisis of 200709 hasmore than most recessionslived up to that. The study examined the impact of deposit money banks credit on agricultural output in nigeria from 1981 to 2014. The role of nonbank financial institutions on financial.
Effect of financial intermediation on economic development of nigeria. Pdf this paper reexamined the impact of financial intermediation on economic growth in nigeria. Financial intermediation and agricultural output in. Empirical evidence from nigeria 37 mckinnon 1973 in his study argued that there is a complimentary relationship between physical capital and money that is reflected in money demand. Effect of financial intermediation on economic development. Financial intermediation and economic growth in nigeria science. The ordinary least square method was used for data analysis. The impact of financial intermediation on economic growth. Introduction financial intermediation involves institutions that raise their funds by borrowing, for onlending. Thus, this study focuses on examining the effect of financial intermediation on economic development in nigeria. This study examined the effect of financial intermediation on the development of the economy of. The nigerian financial system central bank of nigeria.
Pdf this paper seeks to examine the impact of financial intermediation on economic growth in nigeria. The nigerian financial system comprises of various institutions, markets and operations that are in the business of providing financial services. This paper set out to empirical investigate the relationship between financial intermediation and economic growth in nigeria using time series data spanning from 1986 to 2014. This paper set out to empirical investigate the relationship between financial intermediation and economic growth in nigeria using.
The main objective of this study is to determine the implications of cost of financial intermediation on economic growth in nigeria. Time series data from 1970 to 2010 were used and were gathered from the cbn publications. Pdf financial intermediation and private sector investment. Intermediation role of deposit money banks dmbs and real. Uncler this definition most financial intermediaries operating in the united states are primary.
The role of financial intermediaries in economic development tho dinh nguyen, department of economics and business, hatinh university 447 march 26 street, hatinh city, vietnam, email. The paper examines the empirical relationship between the level of development by financial intermediaries and economic growth in nigeria. Unit root was used to test for data stationarity, while variance inflation factor vif and heterosckedasticity white test were used for data diagnosis. Effect of financial intermediation on economic development of. Financial intermediation and economic development in nigeria. The deposit money banks have traditionally been an. Impact of financial intermediation on nigeria economic. This paper uses unique bankbybank balance sheet and income statement information to investigate the intermediation efficiency in the nigerian preconsolidated banking sector during 200005. This paper seeks to examine the impact of financial intermediation on economic growth in nigeria.
Financial intermediation and private sector investment in nigeria. The impact of financial intermediation on economic growth ssrn. Santomero the wharton school, university of pennsylvania, philadelphia, pa 19096, usa abstract traditional theories of intermediation are based on transaction costs and asymmetric information. This paper tries to fill that gap, by using causality tests to empirically examine the relationship between finance and economic growth. Among the various environments of financial intermediation, the sociopolitical. Chapter ii provides an overview of the macroeconomic developments, and attempts to trace investment financing to. A number of intermediation environmental models were constructed and estimated against annual nigerian data from 1970 to 2000. Pdf impact of financial intermediation on economic growth in. Financial intermediation and agricultural output in nigeria. Financial intermediation and private sector investment in nigeria article pdf available in research journal of finance and accounting 412. What role has financial intermediation played on investment growth in nigeria. The relationship between finance and economic growth has received considerable attention in economic development literature during recent decades. Impact of financial intermediation on nigeria economic growth 19812016, download the full project work from chapter one to five.
These include insurance companies, credit and cooperative societies, investment companies and the nigeria social insurance trust fund nsitf. Besides the performance of specialized tasks, several theoretical models posit that they mitigate the costs associated with information acquisition and the conduct of financial. This pdf is a selection from an outofprint volume from the national bureau of economic research volume title. There is a growing concern as to whether the cost of financial intermediation.
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