BANKING SECTOR DEVELOPMENT AND PERFORMANCE OF THE NIGERIAN ECONOMY

Abstract

The study examines banking sector development and performance of the Nigerian economy using time series data for the period 1988 to 2013. The study uses unit root testto determine the stationary state of the variables. It also employs the Johansson co-integration and error correction model (ECM) statistical techniques to establish both short-run and long-run dynamic relationships between the endogenous and exogenous variables. The findings reveal that total number of banks (TNB), broad money supply (M GR) and interest rate had 2 negative effects on the performance of the Nigerian economy in the period observed and were statistically insignificant. However,bank credit and bank deposit have positive impact on economic growth and the relationships are statistically significant in the short- run. The paper concludes that certain banking sector variables positively promote economic growth in Nigeria.The paper recommends that monetary authority, the Central Bank of Nigeria should strengthen the banking sector by coming up with appropriate monetary and regulatory policies that promote the financial intermediation role of banks and ultimately banks' contribution to Nigerian economic growth