This study examined the causality between non-oil export, financial sector development and economic growth in Nigeria. The study employed credit to private sector, total bank deposit, prime lending rate, market capitalization, money market instruments as proxy to measure financial sector development, while GDP was used to capture economic growth, using annual data from 1985 to 2015. All the variables were stationary at first difference using the Augmented Dickey Fuller (ADF) and Phillip Perron (PP) tests. The Johansen Cointegration test result showed that a long-run relationship between non-oil export, financial sector development and economic growth existed. The Granger causality test indicates that a bi-directional causality runs from total bank deposit, credit to the private sector and market capitalization to economic growth. Also, a unidirectional causality existed between prime lending rate and economic growth. The study shows that out of the five proxy for financial sector development, three showed significant causality with economic growth. These findings therefore imply that a bi-directional relationship exists between financial sector development and economic growth, indicating that a growth in the financial sector will cause same in the economy and vice versa. Finally, the study recommends that the government formulate policies that will enhance credit to the private sector, such as not operating the Treasury Single Account (TSA) Policy in a holistic manner, so that banks will have fund to propel their credit delivery function effectively; considering the fact that the public sector drives the Nigerian economy as it stands now. However for capital market development, investors protection policies should be enhanced in order to strengthen and improve public confidence in the capital market, such as reducing charges for the purchase and sale of securities and reduction of listing requirements for new companies on the exchange.
KeywordsNon-Oil ExportFinancial Sector Development and Economic Growth
Riman, H.B., Akpan, E.S., Offiong, A.I. and Ojong, C.M. (2013) Nexus between Oil Revenue, Non-Oil Export and Industrial Output in Nigeria: An Application of the VAR Model. International Journal of Financial Economics, 1, 48-60.
Lin, J.Y. and Li, Y. (2007) Exports and Economic Growth in China: A Demand-Oriented Analysis. Mimeo, Centre for Economic Research, Pekin University, Beijing.
Feder, G. (1983) On Export and Economic Growth. Journal of Development Economics, 12, 59-73. https://doi.org/10.1016/0304-3878(83)90031-7
Helpman, E. and Krugman, P.R. (1985) Market Structure and Foreign Trade: Increasing Returns, Imperfect Competition and International Economy. MIT Press, Cambridge, MA.
Krugman, P.R. (1997) Growing World Trade: Causes and Consequences. Brooking Papers on Economic Activity, 1, 327-43.
Olayiwola, K. and Okodua, H. (2013) Foreign Direct Investment, Non-Oil Exports and Economic Growth in Nigeria: A causality Analysis. Asian Economic and Financial Review, 3, 1479-1496.
Rahmaddi, R. and Ichihashi, M. (2011) Exports and Economic Growth in Indonesia: A Causality Approach Based on Multivariate Error Correction Model. Journal of International Development and Cooperation, 17, 53-73.
Mehrara, M. (2014) The Relationship between Non-Oil Trade and GDP in Petroleum Exporting Countries. International Letters of Social and Humanistic Sciences, 1, 63-70.
Ukpolo, V. (1998) Export and Economic Growth in South Africa: Evidence fromCointegration and Granger Causality Test. The African Economic & Business Review, 1, 1-5.
Sami, U., Bedi, U.Z., Muhammad, F. and Asif, J. (2009) Cointegration and Causality between Exports and Economic Growth in Pakistan. Pakistan Economic and Social Survey, 5, 49-63.
Adenugba, A.A. and Dipo, S.O. (2013) Non-Oil Exports in the Economic Growth of Nigeria: A Study of Agricultural and Mineral Resources. Journal of Educational and Social Research, 3, 403-418. https://doi.org/10.5901/jesr.2013.v3n2p403
Onodugo, V.A., Ikpe, M. and Anowor, O.F. (2013) Non-Oil Export and Economic Growth in Nigeria: A Time Series Econometric Model. International Journal of Business Management & Research, 3, 115-124.
Akpan, E.S., Riman, H.B., Duke II, J. and Mboto, H.W. (2012) Industrial Production and Non-Oil Export: Accessing the Long-Run Implications on Economic Growth in Nigeria. International Journal of Economics and Finance, 4, 252-259. https://doi.org/10.5539/ijef.v4n2p252
Olabanji, O.E. and Henri, O. (2013) Econometric Analysis of Export and Economic Growth in Nigeria. Journal of Business Management and Applied Economics, 2, 1-14.
Abogan, O.P. Akinola, E.B. and Baruwa, O.I. (2014) Non-Oil Export and Economic Growth in Nigeria (1980-2011). Journal of Research in Economics and International Finance, 3, 1-11.
Uche. M.O. (2009) Exports and Economic Growth in Nigeria: An Empirical Analysis. Nigerian Economic Society (NES), Ibadan, Oyo State.
Okafor, E.I., Eje, G.C. and Nwafor, O.C. (2015) Post Deregulation Evaluation of Non-Oil Export and Economic Growth Nexus in Nigeria: An Empirical Analysis. Journal of Economics and Finance, 6, 53-59.
Ogunjimi, O., Aderinto, E. and Ogunro, T. (2015) An Empirical Analysis on the Relationship between Non-Oil Export and Economic Growth in Nigeria. International Journal of Academic Research in Business and Social Sciences, 5, 68-78. https://doi.org/10.6007/IJARBSS/v5-i12/1931
Usman, F. (2010) Non-Oil Export Determinants and Economic Growth in Nigeria (1985-2008). European Journal of Business and Management Sciences, 3, 124-146.
Ogbonna, M. (2010) The Contributions of Non-Oil Export to the GDP of Nigeria. Lincoln Publishers, Asaba.
Ozoudo, P.J. (2010) Reviving Nigeria’s Non-Oil Sector for Economic Development. CBN Economic and Financial Review, 35, 22-26.
Nwachukwu, P.O. (2014) The Impact of Non-Oil Export Strategies on Economic Growth in Nigeria (1970-2013). Journal of Economics and Sustainable Development, 5, 65-69.
Schumpeter, J.A. (1911) The Theory of Economic Development. Harvard University Press, Cambridge.
Goldsmith, R.W. (1969) Financial Structure and Development. Yale University Press, New Haven.
Shaw, E.S. (1973) Financial Deepening in Economic Development. Oxford University Press, New York.
McKinnon, R.I. (1973) Money and Capital in Economic Development. The Brookings Institution, Washington DC.
Hicks, J. (1969) A Theory of Economic History. Clarendon Press, Oxford.
Osinubi, T.S. (2002) Does Stock Market Promote Economic Growth in Nigeria? http://sta.uwi.edu/conferences/financeconference/
Ahmad, E. and Malik, A. (2009) Financial Sector Development and Economic Growth: An Empirical Analysis of Developing Countries. Journal of Economic Cooperation and Development. 30, 17-40.
Godfrey, N. (2013) Financial Sector Development and Economic Growth: Evidence from Zimbabwe. International Journal of Economics and Financial Issues, 3, 435-446.
Jayaraman, T.K. and Choong, C. (2007) Financial Sector Development and Growth in Fiji: An Analysis of Credit Boom and Its Implications. The Asia Pacific Economic Journal, 5, 1-20.
Dandume, M.Y. (2014) Financial Sector Development, Economic Growth and Poverty Reduction: New Evidence from Nigeria. Journal of the Faculty of Economics and Administrative Sciences, 4, 2-22.
Kagochi, J.M. (2013) Financial Development and Economic Growth in Kenya: Evidence from Expanded Neoclassical Growth Approach. Asian-African Journal of Economics and Econometrics, 13, 117-131.
Chisunga, D. (2015) Causal Relationship between Financial Sector Development and Economic Growth: A Case of Zimbabwe. IOSR Journal of Business and Management (IOSR-JBM), 17, 1-12.
Vazakidis, A. and Adomopoulos, A. (2009) Financial Development and Economic Growth: An Empirical Analysis of Greece. American Journal of Applied Sciences, 6, 1410-1417. https://doi.org/10.3844/ajassp.2009.1410.1417
Nkoro, E. and Uko, A.K. (2013) Financial Sector Development-Economic Growth Nexus: Empirical Evidence from Nigeria. American International Journal of Contemporary Research, 3, 87-94.
Khan, S. M. and Senhadji, S. (2003) Financial Development and Economic Growth: An Overview. IMF Working Paper wp/00/209, International Monetary Fund, Washington DC.
Kiprop, M.J., Kalio, A., Kibet, L. and Kiprop, S. (2015) Effect of Financial Development on Economic Growth in Kenya: Evidence from Time Series Analysis. European Journal of Business and Social Sciences, 3, 62-78.
Odeniran, S.O. and Udeaja, E.A. (2010) Financial Sector Development and Economic Growth Empirical Evidence from Nigeria. Central Bank of Nigeria Economic and Financial Review, 48, 91-124.
Adelakun, O.J. (2010) Financial Sector Development and Economic Growth in Nigeria. Department of Economics, Joseph Ayo Babalola University, Ikeji Arakeji.
Osuji, C. and Chigbu (2012) An Evaluation of Financial Development and Economic Growth in Nigeria: A Causality Test. Department of Accounting, Banking and Finance, Delta State University Asaba Campus, Asaba.
Sunde, T. (2012) Financial Sector Development and Economic Growth Nexus in South Africa. International Journal of Monetary Economics and Finance, 5, 64-75. https://doi.org/10.1504/IJMEF.2012.044467
Ubaje, D.O. and Ubaje, H.E. (2014) Empirical Study of Financial Sector Development on Economic Growth in Nigeria (1990-2010). International Journal of Public Administration and Management Research, 2, 122-137.
De Gregorio, J. and Guidotti, P.E (1995) Financial Development and Economic Growth. World Development, 23, 433-448. https://doi.org/10.1016/0305-750X(94)00132-I