FINANCIAL DEEPENING AND EXPORTS ACCOMPLISHMENT IN NIGERIA: AN ARDL AND ECM APPROACH

Rebecca Folake Bank-Ola

Abstract


The financial system by generating crucial stabilizing benefits through improved access to financial services and transaction volumes in Nigeria, is adjudged to be mildly free from financial repression resulting in reduction of export accomplishments as a result of weak liquidity management and reactive technological innovations. This necessitated the study to examine financial deepening’s impact on export accomplishment in Nigeria from 1981 to 2020. Domestic credit to private sector, money supply, foreign direct investment, rate of inflation and trade openness were the explanatory variables while export was the dependent variable. The Auto-Regressive Distributed Lag (ARDL) model and Error Correction Model(ECM) was employed using time series data. The results of the analysis showed a negative and significant effect of financial deepening on the country’s export. Money supply, foreign direct investment and trade openness has positive influence, whereas inflation rate was negative on export accomplishment. The conclusion derived from the results is a negative and significant relationship between financial deepening and export accomplishment in Nigeria while the reverse is the case for money supply, foreign direct investment and trade openness; implying problems of credit allocation, financial regulation and supervision.  The recommendation is that the Nigerian government through its policy originators should improve their efforts on institutional and policy reforms in order to expand export accomplishment by encouraging stable, sustainable and innovative financial deepening in a conducive economic and political environment for optimal growth performance.


Keywords


Financial deepening, export accomplishment, trade openness, Inflation, Auto-Regressive Distributed Lag Model.

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