The Effect of Financial Deepening on Economic Growth in Nigeria
This study investigated the effect of financial deepening on economic growth in Nigeria. The study covered the period of 1986 to 2019 and data were sourced from Central Bank of Nigeria Statistical Bulletin (2019). Data were analyzed, Johansen Co-integration test, two-stage least squares and Pairwise Granger Causality techniques. Based on findings, long run relationship was discovered between financial deepening indices and economic growth. It was also established that money supply and market capitalization as a percentage of gross domestic product had positive and significant effect on economic growth. Liquidity ratio was also established to have insignificant effect on real gross domestic product while total savings as a percentage of gross domestic product and inflation rate had negative and significant effect on real gross domestic product. The study concludes that, financial depending contributed positively and significantly to Nigerian economic growth. It was recommended that, money supply should be increase in line with the structure of the economy in order to improve the level of economic activities and hence economic growth and more efforts and policies should be initiated to further develop the Nigerian capital market. Keywords: Financial deepening, economic growth, liberalization, financial market.