The state's role in promoting Nigerian financial development and economic growth

Abstract

Purpose

The purpose of this study is to propose a framework for conceptualizing the finance-growth theory in developing economies.

Design/methodology/approach

The study uses a cointegration and error correction model to investigate the possible influence of key socio-political characters of a state on the causal relationship between financial development and economic growth. A developing economy (Nigeria) which had experienced decades of autocratic military governance was studied. Three characters of the state (ethnicity, civil war and military governance) were derived from a historical review and were introduced into the cointegration analysis as dummy variables.

Findings

Evidence of a causal relationship was found to exist from financial development to economic growth and the characters of the state were found to have no significant impact on this relationship.

Research limitations/implications

The research limitations were based on the reliability of data recorded between 1960 and 2007.

Practical implications

This study is practical from the point of view of the integration of qualitative social disturbances into a quantitative model targeted at exploring the practical developmental impact these disturbances may have had and continue to have on economic growth.

Social implications

The social implication of this study stems from the impact that adverse socio-political influences may have on financial development and economic growth.

Originality/value

This is an original piece of research focused at understanding the unique social, political and macroeconomic circumstance of a strategically relevant developing economy.

Citation

Chidozie Uzonwanne, G. (2014), "The state's role in promoting Nigerian financial development and economic growth", International Journal of Social Economics, Vol. 41 No. 5, pp. 380-396. https://doi.org/10.1108/IJSE-04-2013-0088