Does Financial Sector Development Promote Industrialization in Nigeria?
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IJRSS & K.A.J
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This paper examines the long run and causal relationship between financial sector development and industrialization in Nigeria for the period 1981 to 2011 using time series data. Results from a multivariate VAR and vector error correction model provide evidence of long run relationship between financial sector development and industrialization in Nigeria. The two measures of financial development had contrasting effects on industrial output. Ratio of private sector bank credit to GDP has a positive relationship with industrial output while the ratio of broad money stock to GDP has a negative relationship with industrial output. Granger causality test reveals long-run unidirectional causal link running from industrialization to financial development. There is therefore the urgent need for government to consolidate on past financial sector reforms to address the challenges of financial intermediation in the domestic financial sector to improve loan disbursement to the industrial sector of the Nigerian economy.
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HB Economic Theory