Effects of Financial Deepening on Saving Mobilization: Evidence from African Countries

2018 ◽  
Vol 9 (07) ◽  
pp. 20917-20928
Author(s):  
Daniel Kwabena Twerefou ◽  
Baafi Yaw Ayimadu
Keyword(s):  
Interest Rate ◽  
Gross Domestic Product ◽  
Private Sector ◽  
Money Supply ◽  
Financial Sector ◽  
Domestic Product ◽  
Financial Deepening ◽  
Domestic Savings ◽  
Domestic Credit ◽  
The Impact

Purpose:The purpose of this paper is to investigate the impact of financial deepening proxied by Broad Money Supply as a percent of Gross Domestic Product and Domestic Credit to Private Sector as a percentage of Gross Domestic Product on savings proxied by Gross Domestic Savings as a percent of Gross Domestic Product in Africa over the period 1998 – 2015  Design/methodology/approach: The study uses panel data of forty-two (42) countries in Africa over the period 1998 – 2015 and the system generalized method of moments dynamic panel estimation framework. Findings: The paper finds an insignificantly positive relationship between Broad money supply and Gross Domestic Savings in Africa. However, the impact of Domestic Credit to Private Sector was negative and significant. This results indicate that financial deepening has not stimulated domestic resource mobilization in Africa.  However, growth in per capita income had a significantly positive impact on Gross Domestic Savings which is consistent with the life cycle theory, increase in real interest rate negatively affected Gross Domestic Savings while increase in age dependency reduced Gross Domestic Savings.  Practical implications: Policies should focus on deepening the financial sector since it has the tendency to impact positively on savings. Such polices  should center on extending financial services to the rural areas through the provision of infrastructure such as roads, electricity as well as the development of innovative financial instruments that will attract the large informal sector.  Reducing the fragmented nature of the market and the high transaction costs as well as balancing the dominance of the banking sector will help improve efficiency of the sector and consequently, its ability to mobilize resources. Pursuing growth-enhancing policies that focus on value addition to raw materials and the adoption of technology to ensue efficiency in production could result in higher productivity and consequently savings. Efforts should also focus on reducing interest rates since many Africans are net borrowers and thus increase in interest rate will increase the cost of borrowing which will have adverse impacts on savings. Originality/value: The paper offers significant value in shaping and improving the financial sector in Africa with the view to enhancing savings.

Financial Deepening, Financial Intermediation and Nigerian Economic Growth: Time Variant Analysis

2019 ◽  
pp. 60-73
Keyword(s):  
Economic Growth ◽  
Interest Rate ◽  
Gross Domestic Product ◽  
Private Sector ◽  
Money Supply ◽  
Domestic Product ◽  
Financial Deepening ◽  
Causality Test ◽  
Real Gross Domestic Product ◽  
Long Run

This study examines financial deepening, financial intermediation and Nigerian economic growth. The main purpose is to examine the relationship between financial deepening and Nigerian economic growth while the specific objectives are to examine the impact of interest rate, capital market development, rational savings, credit to private sector and broad money supply on the growth of Nigerian. Secondary data of the variables were sourced from the publications of Central Bank of Nigeria (CBN) from 1981-2017. Nigerian Real Gross Domestic Product (RGDP) was used as dependent variable while Broad money supply (M2), Credit to Private Sector (CPS), National Savings (NS), Capital Market Capitalization (CAMP) and Interest Rate (INTR) was used as independent variables. Multiple regressions with E-view statistical package were used as data analysis techniques. Cointegration test, Augmented Dickey Fuller Unit Root Test, Granger causality test was used to determine the relationship between the variable in the long-run and short-run. R2, F – statistics and β Coefficients were used to determine the extent to which the independent variable affects the dependent variable. It was found from the regression result that Broad Money Supply, credit to private sector have position effect on the growth of Nigerian Real Gross Domestic Product while National Savings, Capitalization and Interest Rate on Nigeria Real Gross Domestic Product. The co-integration test revealed presence of long-run relationship among the variables, the stationary test indicated stationarity of the variables at level. The Granger Causality Test found bi – variant relationship from the dependent to the independent and from the independent to the dependent variables. The regression summary found 99.0% explained variation, 560.5031, F – statistics and probability of 0.00000. From the above, the study concludes that financial deepening has significant relationships with Nigerian economic growth. We recommend that government and the financial sector operators should make policies that will further deepen the functions of the financial system to enhance Nigerian economic growth.

Financial Deepening, Financial Intermediation and Nigerian Economic Growth: Time Variant Analysis

2019 ◽  
Vol 1 (1) ◽  
pp. 60-73
Author(s):  
Uzokwe Grace Onyinyechi
Keyword(s):  
Economic Growth ◽  
Interest Rate ◽  
Gross Domestic Product ◽  
Private Sector ◽  
Money Supply ◽  
Domestic Product ◽  
Financial Deepening ◽  
Causality Test ◽  
Real Gross Domestic Product ◽  
Long Run

This study examines financial deepening, financial intermediation and Nigerian economic growth. The main purpose is to examine the relationship between financial deepening and Nigerian economic growth while the specific objectives are to examine the impact of interest rate, capital market development, rational savings, credit to private sector and broad money supply on the growth of Nigerian. Secondary data of the variables were sourced from the publications of Central Bank of Nigeria (CBN) from 1981-2017. Nigerian Real Gross Domestic Product (RGDP) was used as dependent variable while Broad money supply (M2), Credit to Private Sector (CPS), National Savings (NS), Capital Market Capitalization (CAMP) and Interest Rate (INTR) was used as independent variables. Multiple regressions with E-view statistical package were used as data analysis techniques. Cointegration test, Augmented Dickey Fuller Unit Root Test, Granger causality test was used to determine the relationship between the variable in the long-run and short-run. R2, F – statistics and β Coefficients were used to determine the extent to which the independent variable affects the dependent variable. It was found from the regression result that Broad Money Supply, credit to private sector have position effect on the growth of Nigerian Real Gross Domestic Product while National Savings, Capitalization and Interest Rate on Nigeria Real Gross Domestic Product. The co-integration test revealed presence of long-run relationship among the variables, the stationary test indicated stationarity of the variables at level. The Granger Causality Test found bi – variant relationship from the dependent to the independent and from the independent to the dependent variables. The regression summary found 99.0% explained variation, 560.5031, F – statistics and probability of 0.00000. From the above, the study concludes that financial deepening has significant relationships with Nigerian economic growth. We recommend that government and the financial sector operators should make policies that will further deepen the functions of the financial system to enhance Nigerian economic growth.

scholarly journals The Impact of Financial Deepening on Economic Growth in Nigeria (1981-2018)

2020 ◽  
Vol 17 ◽  
Keyword(s):  
Economic Growth ◽  
Private Sector ◽  
Interest Rates ◽  
Money Supply ◽  
Commercial Banks ◽  
Financial Sector ◽  
Financial Deepening ◽  
Growth Data ◽  
Main Research ◽  
The Impact

Different academics and experts have acknowledged that developing the financial sector positively impacts economic growth by increasing productivity, progress and national investment. Expanding the financial sector allows financial intermediaries to carry out functionalities of deploying, aggregating and directing a country’s savings into an investment which contributes to domestic progression. This research explores the effect of financial deepening on Nigeria’s growth for 38 years covering 1981- 2018. The main research goals were to investigate the linkages among time and savings deposit of commercial banks, money supply and credit to the private sector on the economy’s growth. Data was obtained from CBN Bulletin different issues and analyzed using Autoregressive Distributed Lag. From the result of analysis, we found out that long run relationship existed but no regressor was found to be significant. Credit to the private sector to GDP was inversely related to GDP growth whereas money supply to GDP had positive relations with economic growth rate, time and savings deposits in commercial banks negatively affected national growth. Policies favoring credit lending to the private sector should be encouraged by stakeholders in the economy, for instance, higher savings interest rates would encourage more savings. More importantly, policies should be enacted to make sure that savings are transmitted into productive investments that can yield financial deepness

scholarly journals THE RELATIONSHIP BETWEEN MONETARY POLICY AND PRIVATE SECTOR CREDIT IN SADC COUNTRIES

2021 ◽  
Vol 9 (1) ◽  
pp. 46-54
Author(s):  
Vikela Liso Sithole ◽  
◽  
Tembeka Ndlwana ◽  
Kin Sibanda ◽  
◽  
...  
Keyword(s):  
Monetary Policy ◽  
Gross Domestic Product ◽  
Private Sector ◽  
Money Supply ◽  
Sustainable Growth ◽  
Domestic Product ◽  
Distributed Lag ◽  
Long Run ◽  
The Impact ◽  
The Relationship

This paper empirically examined the relationship between monetary policy and private sector credit in the Southern African Development Community (SADC) group of countries using a panel autoregressive distributed lag (ARDL) co-integration technique for the period from 2009 to 2018. The Hausman test result indicated that the null hypothesis of long-run homogeneity cannot be rejected and hence we accept the pooled mean group estimators (PMGE) as a consistent and efficient estimator. The PMGE results showed that credit to the private sector and gross domestic product have a positive and statistically significant long-run impact on money supply. The impact of credit to the private sector on money supply is shown by the results to be statistically significant and positive both in the short and long run. The impact of gross domestic product on money supply was found to be statistically significant positive in the long run while positive but insignificant in the short run. The study recommends policy attention that is directed towards the appetite for accelerated growth, investment, and employment in the SADC region but more importantly with more regard to the establishment of sustained macroeconomic stability as a precondition to sustainable growth and for the creation of monetary union in the region.

scholarly journals Interest Rate Management and the Nigerian Economy (1986 — 2018)

2019 ◽  
pp. 1-15
Author(s):  
Kalu, Uko Kalu ◽  
Anyanwaokoro Mike
Keyword(s):  
Monetary Policy ◽  
Exchange Rate ◽  
Interest Rate ◽  
Gross Domestic Product ◽  
Money Supply ◽  
Significant Relationship ◽  
Domestic Product ◽  
Ex Post ◽  
The Impact ◽  
Bound Test

This study sought to examine the impact of interest rate on the Nigeria’s economy during the pre and post Regulation periods (1986 – 2013). It also investigated the joint influence of Inflation, Investment, Exchange Rate, Money Supply and Monetary Policy Rate individually on the Gross domestic Product which was used a proxy for output as well as the causality between all the factors combined and gross domestic product. Ex post facto method was adopted In order to test the hypothesis, the researcher adopted Augmented Dickey Fuller, ARDL, Bound Test and Error Correction Model. The result showed that no significant relationship exists between Gross Domestic Product and Investment, Exchange Rate and Money Supply while still affirming that a significant relationship exist between Gross Domestic Product, Monetary Policy Rate and inflation. The eye of the authorities should be on Inflation at all times, Prudent management of our Oil earnings, adequate savings (Foreign Reserve) and investments as these will help stabilize the fluctuating exchange rate  with its consequent influence on interest rate and economic growth.

scholarly journals The Impact of Financial Deepening on the Economy of Nigeria (1981-2018)

2020 ◽  
pp. 12-21
Author(s):  
Udeme Okon Efanga ◽  
Chinelo Okanya Ogochukwu ◽  
Georgina Obinne Ugwuanyi
Keyword(s):  
Economic Growth ◽  
Gross Domestic Product ◽  
Private Sector ◽  
Positive Impact ◽  
Domestic Product ◽  
Financial Deepening ◽  
International Capital ◽  
Integration Test ◽  
The Many ◽  
The Impact

This study was carried out to investigate the impact of financial deepening on the Nigerian economy between 1981 and 2018. Data employed for this study was elicited from Central Bank of Nigeria Statistical Bulletin of 2018. This study employed real gross domestic product as proxy for economic growth in Nigeria (regress and), while ratio of money supply to gross domestic product, ratio of private sector credit to gross domestic product and ratio of market capitalization to gross domestic product were adopted as regressors. The co-integration test and Fully Modified Least Squares (FMOLS) Model were utilized to analyze data. Inferential results generated there from indicated that financial deepening had positive impact on the Nigerian economy within the period under review. To boost economic growth, we recommend at this time that monetary authorities implement monetary policies to increase money. In the same vein, Nigerian commercial banks should be encouraged to improve upon credit facilities made available to the private sector. Recognizing the positive impact of international capital, this study also recommends that Nigerian policy makers ease some of the many restrictions that currently limit entry of international capital. This singular act would most definitely lead to more companies being listed on the exchange. The result would be the attainment of even more depth to Nigeria’s economy.

scholarly journals Electronic Payment System and Financial Deepening in Nigeria, 2009-2017

2019 ◽  
pp. 1-14
Author(s):  
Edoka Praise Rueben ◽  
Anyanwaokoro, Mike
Keyword(s):  
Gross Domestic Product ◽  
Private Sector ◽  
Money Supply ◽  
Payment System ◽  
Domestic Product ◽  
Series Data ◽  
Financial Deepening ◽  
Electronic Payment ◽  
Automated Teller Machine ◽  
Electronic Payment System

This study sought to evaluate the impact of the electronic payment system on financial deepening indicators in Nigeria with particular focus on the popular Automated Teller Machine (ATM). The study adopted the ex-post factor research design and the granger causality tests, correlation analyses combined with other preliminary tests were used. Quarterly time series data for a 6-year-period 2009-2017, collected from the central bank of Nigeria statistical bulletins were used. Ratios of Broad money supply to Gross Domestic Product (M2GDP) and ratio of credit to the private sector to gross domestic product (CPSGDP) were used as the dependent variable and proxies for financial deepening, while the independent variables included volume of automated teller machine transactions, web payment, mobile payment and point of sales respectively. The research findings there exists a bi-directional relationship between automated teller machine transaction (LATM) and private sector credit (LCPSGDP) in Nigeria. Also, a unidirectional relationship between automated teller machine transaction (LATM) and broad money supply (LM2GDP) in Nigeria. The results recorded from the study agree with existing findings and theories and they all agree that there is a relationship between financial deepening and electronic payment channels in the Nigeria. It is therefore recommended that the government should make policies that will improve the use of diverse electronic channels with the aim of strengthening their impact on the degree of financial depth in Nigeria. Additionally, Adequate regulatory architecture should be put in place to ensure that the negative fallouts of the use of electronic payment channels are minimized. This is with the view to making them more acceptable to the people.

scholarly journals Selected Macroeconomic Variables and Agricultural Sector in Nigeria

2021 ◽  
Vol 7 (06) ◽  
Author(s):  
James Ese Ighoroje ◽  
Catherine, Ogheneovo Orife
Keyword(s):  
Exchange Rate ◽  
Interest Rate ◽  
Gross Domestic Product ◽  
Money Supply ◽  
Agricultural Sector ◽  
Least Square ◽  
Domestic Product ◽  
Agricultural Output ◽  
Macroeconomic Variables ◽  
Ex Post

The study investigated effect of selected macroeconomic variables on agricultural sector output in Nigeria from 1987 - 2019. Annual Agricultural Output (AAO) represented the dependent variable for the study while gross domestic product, interest rate, money supply, and exchange rate represented the explanatory variables. Ex-post factor research design was employed for the study. Augmented Dickey Fuller Unit Roots test and Ordinary Least Square (OLS) Regression techniques were used to analyze data collected. The empirical investigation showed that gross domestic product as well as money supply has a positive and significant effect on agricultural output, while interest rate and exchange rate exerted a negative and insignificant effect on agricultural output. From the study, selected macroeconomic variables have positive effect on agricultural output in Nigeria and this has tremendously contributed to the country's growth and development. The study recommends amongst other; that government should accelerate the rate of economic growth by investing heavily on the agricultural sector so as to boost domestic production and enhance exportation in order to stabilize exchange rate while curbing inflation; give incentives to banks extending agricultural loans by lowering the lending rate on agricultural loans to ease access to funds for agricultural investment.

scholarly journals Impact of inflation on economic growth: evidence from Nigeria

2020 ◽  
Vol 17 (2) ◽  
pp. 1-13 ◽  
Author(s):  
Anthony Olugbenga Adaramola ◽  
Oluwabunmi Dada
Keyword(s):  
Economic Growth ◽  
Exchange Rate ◽  
Interest Rate ◽  
Gross Domestic Product ◽  
Money Supply ◽  
Negative Impact ◽  
Domestic Product ◽  
Government Consumption ◽  
Consumption Expenditures ◽  
Distributed Lag

In an attempt to examine the influence of inflation on the growth prospects of the Nigerian economy, the study employs the autoregressive distributed lag on the selected variables, i.e. real gross domestic product (GDP), inflation rate, interest rate, exchange rate, degree of economy`s openness, money supply, and government consumption expenditures for the period 1980–2018. The study findings indicate that inflation and real exchange rate exert a significant negative impact on economic growth, while interest rate and money supply indicate a positive and significant impact on economic growth. Other variables in the model depict no influence on the economic growth of Nigeria. The causality result shows the unidirectional relationships between interest rate, exchange rate, government consumption expenditures and gross domestic product. However, inflation and the degree of openness show no causal relationship with gross domestic product. As a result, the study recommends that a more pragmatic effort is needed by the monetary authorities to target the inflation vigorously to prevent its adverse effect by ensuring a tolerable rate that would stimulate the economic growth of Nigeria.

Sign in / Sign up

Export Citation Format

Share Document