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

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

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.

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.

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

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.

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

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