Financial Stability and Credit Creation in Nigeria: An Econometric Evaluation

David Umoru () and Lawrence Aghedo

Academic Journal of Economic Studies, 2017, vol. 3, issue 4, 19-23

Abstract: The study empirically examines a co-integrated model of financial stability of Nigerian financial sector in relation to credit financing over the sample period 1990 to 2016. The methodology of error correction was adopted in the study. The study found that credit financing and financial stability are positively linked. Nevertheless, with ecm coefficient of 1.798, the Nigeria’s financial system is unstable; any short run disturbance to the nation’s financial sector will not be restored in the nearest future. Moreover, the coefficient of financial depth is negative implying instability in money supply. As a result, level of the Nigeria’s financial deepening does not enhance the stability of the country’s financial sector. In effect, narrow financial depth causes instability of financial system in Nigeria. So, need arises for resistant and robust institutional advancement of the financial sector, while resilient emphasis on fund enlistment is needed. Also, government should ensure the adherence to credit policy by the banks.

Keywords: Credit creation; financial stability; Sector; Nigeria (search for similar items in EconPapers)
JEL-codes: C62 E51 (search for similar items in EconPapers)
Date: 2017
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Persistent link: https://EconPapers.repec.org/RePEc:khe:scajes:v:3:y:2017:i:4:p:19-23

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