FINANCIAL INTERMEDIARY AS AN INSTRUMENT OF REVITALIZING THE NIGERIAN ECONOMY IN A DEPRESSION

ABSTRACT

This study empirically investigated how financial intermediaries can be used as an instrument of revitalizing the Nigeria economy in depression. Time series data of period of 1990-2020 was obtained from Central Bank of Nigeria statistical bulletin. Ordinary least square (OLS) method was adopted. Real Gross Domestic Product (RGDP) was used to measure economic growth. Bank deposits (BD), Bank loans (BL) and interest rate (INTR) were used to measure financial intermediation. Also, inflation rate (INFL) was used to measure recession since is one of the indicators of recession. The empirical investigation shows that bank deposits (BD) has a positive impact on economic growth, that is, #1billion increase in bank deposit will lead to #3.3billion increase in economic growth. The study also shows that bank loans (BL) exert a negative relationship but statistically significant at 1 percent level. The researcher observed that the reason for the negative relationship may be due to the huge non-performing loans of commercial banks. Inflation rate and interest rate both impact negatively on the economic growth. Money supply has a positive impact on economic growth. From the study findings, financial intermediary has a positive impact on economic growth and can be effectively used to lift the Nigerian economy from the current recession. Also, the study has recommended strong policies to enhance well-functioning and organized financial sectors.

Keywords: Financial intermediaries, economic growth, recession, depression.