FINANCIAL INTERMEDIATION AND ECONOMIC GROWTH IN NIGERIA (1992 - 2011)

One of the activities of financial institutions (Banks) involves intermediating between the surplus and deficit sectors of the economy. In Nigeria, banks dominate the financial sector and there is detailed information about Nigerian banking history but little information is available on the activities of the financial industry and how they affect the economy where they operate. Therefore, this study seeks to explore in the light of past trends, the extent to which financial intermediation impacts on the economic growth of Nigeria between the period of 1992 – 2011. The study adopted the ex-post facto research design. Time series data for the twenty years period 1992 – 2011 were collated from secondary sources and the Ordinary Least Squares (OLS) regression technique was used to estimate the hypotheses formulated in line with the objectives of the study. Real Gross Domestic Product, proxy for economic growth was adopted as the dependent variable while the independent variables included total bank deposit and total bank credit. The empirical results of this study shows that both total bank deposit and total bank credit exert a positive and significant impact on the economic growth of Nigeria for the period 1992 – 2011. This paper therefore recommend amongst others that banks should increase the interest paid to customers on the different bank accounts they operate to encourage more patronage from them and as well ensure that a major part of their credit is channelled to the productive sectors of the economy such as agriculture, industry and power.