EHIEDU, V. C.
Department of Accounting, Banking, and Finance
Delta State University, Abraka, Asaba Campus
and
NWAJEI, A. C.
Department of Accounting, Banking, and Finance
Delta State University, Abraka, Asaba Campus
ABSTRACT
The study examined the effect of the financial intermediation process on the growth of the Nigerian economy. The study spanned from 1995 to 2019. Variables considered include total bank loans and advances, total bank deposits, cost of loans and advances, and cost of deposits against the real gross domestic product. The study adopted the Vector Error Correction Model and OLS estimation technique. The VECM reported that the model is rightly signed with a VEC Cointegrating value of less than one but was significant still. The Ordinary least square test reported that total bank deposit, total bank loans, and advances, and cost of bank loans and advances exerted a positive effect on real gross domestic product. Meanwhile, the cost of deposit exerted a negative effect on economic growth. Expectedly, total bank loans and advances exerted a high statistically significant effect on economic growth. Based on this, we concluded that a total bank loan is a strong determinant of economic growth. It is on this premise that we recommend that, the current bank loan policy should be sustained. Lastly, there is a need to intensify the deposit collection and accumulation process in Nigeria.
Keywords: Financial Intermediation Process, Economic Growth, Evidence, Nigeria