On the Efficiency of Financial Intermediation in Nigeria’s Growth Performance: A Two Stage Least Square Approach

Okon J. Umoh and Kenneth Onye ()

MPRA Paper from University Library of Munich, Germany

Abstract: We test the efficiency of financial intermediation in Nigeria’s economic growth performance using the Two Stage Least Square (TSLS) technique of regression analysis. Relying on a tripartite simultaneous equation regression model, the results show that financial intermediation process in Nigeria has been partly effective but sub-optimal. Evidence from the structural parameter estimates indicate that low savings coupled with poor credit support to the real sector attenuated the growth effect of financial intermediation in Nigeria. This is attributable to high interest spread, low per capita income, poor banking habit and high inflation, among others. It is recommended that the devices for improving financial intermediation and Nigeria’s growth performance are to set a positive and moderate interest rate, increase the volume of deposit, increase bank branches, increase income per capita and continue with liberalization.

Keywords: Financial intermediation; Economic growth; TSLS; Nigeria (search for similar items in EconPapers)
JEL-codes: E5 G2 O4 (search for similar items in EconPapers)
Date: 2012
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Published in European Journal of Scientific Research 4.95(2012): pp. 444-456

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