Financial sector performance and economic growth in Nigeria

Abstract

Towards the end of 2010, banking halls in Nigeria were crowded with people. Following the Central Bank of Nigeria’s advice, banks were updating records of their clients. The essence was for the banks to be better informed about their clients and their sources of funds with a view to eliminating or limiting the problem of money laundering in Nigeria. This is only one of several policies or reforms that the financial sector in Nigeria has gone through in recent times. The numbers of banks were pruned down through the recapitalization programme, non-performing microfinance banks were weeded out, and five bank chiefs were accused of mismanagement and replaced. The Nigerian Stock Exchange also experienced difficulties leading to the exit of its Chief Executive Officer. Practically, every aspect of the Nigerian financial system has in recent times experienced one form of reform or challenge but these are the sources of capital formation for the real sector in Nigeria. In view of these how well has the sector performed its role as a driver of economic growth? This work using data obtained from the Central Bank spanning 24 years was able to establish that there is a positive relationship between the performance of the sector and economic growth in Nigeria