FINANCIAL DEVELOPMENT AND PRIVATE SECTOR GROWTH IN NIGERIA: A TIME SERIES ECONOMETRICS INVESTIGATION

Abstract

The data for this study were gathered using time series data from the Statistical Bulletin of the Central Bank of Nigeria. The expansion of the private sector was the dependent variable, whereas the broad money supply, interest rates, inflation rate, and credit to the private sector were the explanatory variables. On the basis of the time series data, econometric techniques were employed to develop and test hypotheses. The study, which was conducted at a significance level of 5%, revealed that all variables were stationary at the first difference and suggested the presence of at least one co-integrating connection. Nonetheless, there was no statistically significant short-term equilibrium relationship discovered between Nigeria's financial performance and the expansion of the private sector. Furthermore, there was no correlation between the growth of the private sector and the progress of government finances. The report concludes that financial development has not contributed significantly to Nigeria's transition to a private sector-driven economy. It recommends making use of advantageous and low lending rates to boost the private sector and the economy. Regulatory bodies should maintain stable interest rates to ensure price stability and single-digit inflation. As a result, there would be a rise in public trust in financial institutions and opportunities for innovations that could boost economic production. The study also suggests that the Central Bank of Nigeria (CBN) and policymakers implement dynamic currency rates in order to incentivize banks to finance the private sector.