Analysis of the impact of financial development indicators of the banking, insurance and pension sectors on economic growth in Nigeria

Abstract

The study examined the impact of financial development indicators of the banking, insurance and pension sectors on economic growth in Nigeria. The financial development indicators of the sectors utilised were ratios of net domestic credit, gross premium and total pension assets. Quarterly data spanning from 2007 to 2019 were obtained for the study. The research design adopted for the study is expost facto. The Autoregressive Distributed Lag model is employed to assess the impact of financial development indicators of the aforementioned sectors on economic growth. The results revealed that in the short and long run, net domestic credit has negative and significant impact on economic growth and gross premium has a positive and significant impact. Pension assets have negative and insignificant impact on economic growth in the short run but positive and insignificant impact in the long run. On the basis of the findings, the study noted that the impact of domestic credit on the real sector is minimal. Also, the insignificance of the pension sector may be due to the fact that the funds are mainly invested in fixed income securities, which later ends up with the retirees. The study recommended among others that government should provide the necessary infrastructure as the high cost of doing business translates to the high cost of borrowing in banks.