Published : 2020-12-28

Financial development and economic growth in Nigeria: asymmetric cointegration and threshold analysis

Raymond Osi Alenoghena

Olufemi Muibi Saibu

Babatunde Wasiu Adeoye


This study examines the nonlinear relationship between financial development and economic growth in Nigeria, covering the period from 1980 to 2018, in an effort to explain the direction of linearities and determine the exact threshold policy points for financial development variables. The financial development proxies adopted in the
study are broad money and credit to the private sector. While deploying the nonlinear autoregressive distributed lag (NARDL) approach to ascertain the asymmetric cointegration status of financial development and GDP growth, the turning point between the variables of study is estimated using the threshold regression approach. The findings from the NARDL analysis show that the relationship between the financial development variables and economic growth are cointegrated in the long run and have a U-shaped asymmetrical relationship. Furthermore, the discrete threshold regression analysis reveals that while the switching point for broad money is 17.73% of GDP, it is 6.03% of GDP for credit to the private sector. Therefore, whenever the level of the financial development indicators falls below the estimated
tipping point, there is a drag on the country’s economic growth. The study recommends the implementation of the financial development threshold points as the minimum levels by which to achieve positive effects on the country’s economic growth. A further recommendation to achieve rapid progress in financial development entails the rapid monetisation of financial transactions and the expansion of financial access as well as the strengthening of efficiency and regulation of the financial markets.


financial development, broad money, credit to private sector, economic growth, Nonlinear Autoregressive Distributed Lag (NARDL), Threshold Regression





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Alenoghena, R. O. ., Saibu, O. M. ., & Adeoye, B. W. . (2020). Financial development and economic growth in Nigeria: asymmetric cointegration and threshold analysis. Forum Scientiae Oeconomia, 8(4), 43–63.

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