The Contribution of Banking Sector to Economic Growth in Nigeria (1980 -2019)

Abstract

The banking system remains one of the major development sectors in emerging markets and developed economies. The study examines the contribution of banking sector to economic growth for a period of forty (40) years. The Nigerian banking sector has undergone remarkable changes over the years in terms of technological payment system, digital assets development, increase in number of institutions and ownership structures. The data used in this study are collected from the period of 1980 to 2019. Augmented Dickey Fuller (ADF) and Philip Perron Unit root test and Ordinary Least Square method are adopted. Unit root test confirms the stationary of all variables at first difference. Results show that deposits, advances, investments and profit after tax have significant different proportional effects on economic growth in Nigeria. The paper recommends a two-year interval reforms in the banking subsector in order to stimulate economic growth and to achieve financial stability in Nigeria.