Impact of Financial Sector Developments on Economic Growth Rate Evidence from Nigeria, 1981-2021

Financial sector development can be defined as financial system activities that help in facilitating the mobilization of capital for industrialization and channeling capital funds to the productive investments of the economy which constituted important determinants of economic growth. Financial sector development is also seen as the wholesale, retail, formal, and informal institutions in an economy offering financial services to consumers, businesses, and other financial institutions. In its broadest definition, it includes everything from banks, stock exchanges, and insurers, to credit unions, microfinance institutions, and money lenders. Therefore, the broad objective of this study is to measure the impact of financial sector developments on the economic growth rate in Nigeria, However, the specific objectives of the study are to determine the impact of Bank credit to the private sector on the economic growth rate in Nigeria, Measure the impact of Bank money supply on economic growth rate in Nigeria, Investigate the impact of capital market Stock value on economic growth rate in Nigeria, Access the impact of Total Domestic saving on economic growth rate in Nigeria. The study adopted a multiple regression method called the autoregressive Distributed lag model. (ARDA), Result reveals that the Ratio of credit to the private sector positively and non-significantly impacted economic growth in Nigeria, Ratio of broad money supply positively and significantly impacted economic growth in Nigeria, Ratio of total domestic savings positively and significantly impacted on economic growth in Nigeria, Ratio of stock market value positively and significantly impacted on economic growth in Nigeria, It was concluded that financial sector development had a positive and significant impact on economic activities in Nigeria. It was recommended that since the Nigerian private sector index is poor. Government should be advised to aggressively embark on giving out credits to small and medium enterprises and as well as producer to improve productivity and growth in the economy. Financial development such as regulation in exchange rate fluctuation, stabilization of exchange rate by the monetary authorities and efficient money supply will be encouraged to enhance improvement in external reserve capacity. Monetary authorities should endeavor to combat constructively the effect of inflation, regulate inflation rate so that private sectors will patronize private sector investment that will influence private sector policies effectively through savings and finally, Capital market activities should be efficiently more regulated so that shorter, medium and long-term loan can be easily sourced thereby improving the productive sector and the economy.