Financial deepening and sectoral performance in emerging markets: evidence from the Nigerian agricultural and manufacturing sectors

Mosab I. Tabash; Babatunde Afolabi; Johnson Adelakun; Ruth Astuwa

doi:10.51599/are.2022.08.01.09

Mosab I. Tabash College of Business, Al Ain University https://orcid.org/0000-0003-3688-7224
Babatunde Afolabi Federal University Oye Ekiti https://orcid.org/0000-0002-8601-0781
Johnson Adelakun Federal University Oye Ekiti https://orcid.org/0000-0002-5984-8976
Ruth Astuwa Afe Babalola University https://orcid.org/0000-0002-2698-4111

DOI: https://doi.org/10.51599/are.2022.08.01.09

Keywords: financial deepening, sectoral growth, agricultural sector, manufacturing sector.

Abstract

Purpose. The formal sector in Nigeria has experienced some transformation in the last 20 years. This has led to advancement and deepening of sector. Despite the progression achieved in financial sector, it has not yielded the desired impacts on the economy as experienced in other emerging economies. Hence, this research assessed the advantageous effects of financial deepening on sectoral advancement in Nigeria.

Methodology / approach. The research used the proxies of broad money (M2) to GDP ratio, and the ratio of credits to private sector to GDP for financial deepening. The data regarding time series were retrieved from Thomson Reuters DataStream and Augmented Dickey-Fuller unit root test and Johansen co integration approaches used for the long-oriented effects and Error Correction approach for short orientation estimation.

Results. The impact of financial deepening was positive and statistically significant in explaining agricultural growth, but the performance of the manufacturing sector was not significantly impacted in the reviewed period, hence government should make efforts to reduce the interest rate on loan bestowed to the private sector.

Originality / scientific novelty. The variables assortments have never been describing in the literature. Particularly, this study considers financial deepening as a significant determinant of sectoral development in the Nigerian context.

Practical value / implications. According to the results of the study, it is recommended to increase credits to the manufacturing sector through specialized banks and ensures the growth of the financial industry in terms of provision of quality financial instruments, sound financial and money markets, and transparent legislation for healthy competition in the industry for better sectoral performance.

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