Abstract:

Despite the ongoing process of economic reforms along with the financial liberalization measures, the financial sector has been facing challenges in terms of both external shocks and internal issues. Hence, this study examines the impact of financial sector behaviour on the performance of economic growth in Nigeria using Autoregressive Distributed Lag Bound Test Technique (ARDL) over the period of 1981-2016. Data were sourced from the CBN Statistical Bulletin, International Financial Statistics (IFS) and World Bank Development Indicator (WDI). The results indicate that financial sector development in Nigeria has significant negative effect on economic growth in the long-run and significant negative effect in the short-run. The case of Nigeria is therefore not different from what has been observed generally in oil-dependent economies. The policy recommendation based on these findings is that there should be extensive liberalization of the business and financial services. Also, the Central Bank of Nigeria should strive to maintain macroeconomic stability through low interest and inflation rates in order to attract more investors into the market thereby promoting the private sector development and thereby enhancing rapid economic growth.