FINANCIAL SECTOR PERFORMANCE AND NIGERIA’S ECONOMIC GROWTH: AN EMPIRICAL EVALUATION OF PRE AND POST SAP REFORMS ERA (1960 – 2024)

Abstract

This study examined the relationship between Financial Sector Performance and Nigerian’s Economic Growth, proxy by GDP, taking an empirical analysis of the Pre SAP & Post SAP Financial Sector Reforms [ 1960 – 2024]. Selected indicators/ variables of financial sector performance that were used include; real interest rate[ INT], the ratio of broad money supply to GDP [ MSGD], the ratio of private sector credit to GDP [ PSGD] and ratio of total deposits of deposit money banks to GDP [ TDGD]. The long run relationship among the variables were examined using  Johansen Co-integration Test. Test for Stationarity was conducted using the Augmented Dickey- Fuller [ ADF] Unit Root Test. The Test for Causality was done using the Pair – Wise Granger Causality Test. The test of difference between two Means was conducted to examine the Statistical Significance of each selected Variable in both periods. The ordinary least square regression method was employed to capture the relationship between Financial Sector Performance and Nigeria Economic Growth [ GDP]. For a comparative analyses, there were Two Multiple Regression analysis thus; the first for, Pre – SAP Period ;1960 – 1986 [ the period when the economy was regulated by the government] and the second, the Post- SAP Period; 1987 – 2024 [ the period of deregulation and other reforms]. This was to enable the study establish a relationship between a Financial Sector performance variable and economic growth in each period, then compare the Statistical significance in both periods. The findings reveal that the relationship between Financial sector performance and Nigeria’s economic growth is more significant in the Post- SAP Period, but not remarkably better than the Pre- SAP Period over the Pre-SAP Period, this can be attributed to other variables not included in the study. Thus, the study recommends among others that, the Monetary authorities should direct their efforts towards achieving a positive real interest rate and lowering lending rate in Nigeria. This is to ensure that reforms that are complimentary do not work on the opposite direction. Furthermore, the study recommends that, the Monetary authorities should avoid drastic policy reversal especially on matters affecting the total deposits of deposit money banks. Rather, it should concentrate efforts in fine-turning the exiting policy measures, which will further enhance the assets of banks and its operation. This measure, we believe, will go a long way at enhancing fund’s mobilization in the country, thus spurring the economic growth.