Abstract

This study investigates the relationship between financial deepening and economic expansion in Nigeria between 1981 and 2019. The research aims to examine how credit to the private sector, total money supply, and gross domestic savings contribute to Nigeria’s economy’s expansion. However, data were collected secondarily from the Central Bank Statistical Bulletin, 2020. The research adopted the use of a unit root test and a co-integration test to investigate the long-term relationship between the variables. The findings depicts that all of the variables associated with financial deepening have significantly impacted Nigeria’s economy’s expansion. Based on the results, it was suggested that the money supply, credit to the private sector, and gross domestic savings financial deepening proxies have a significant and beneficial effect on the economy’s expansion. Also, the government and the institutions in charge of the currency should develop measures that would assist in fostering a saving mentality among the general population. Thus, this may be accomplished by raising the interest rate on deposits, encouraging individuals to deposit more of their money in financial institutions, and increasing the availability of loanable funds. This would ultimately result in an increase in investment and a decrease in the interest rate.

Keywords: Expenditure, Economic growth, Financial deepening, Loanable funds