Financial Intermediation and Capital Formation in Nigeria

Economics and Finance

This study will examine how financial intermediation influences capital formation in Nigeria from 1981 to 2022. Further to this, there was a review on how the private sector credit, money supply, and deposit mobilization influence capital formation in Nigeria. Data utilized in the study were sourced from the Central Bank of Nigeria statistical bulletin of various issues. The study applied the descriptive, unit root, Johansen co-integration and the Vector Error Correction (VEC) estimates. The study test reveals that all the variables were stationary at first differences necessitating the Johansen co-integration test that validates the existence of long-run form. The VEC estimate shows that private sector credit, money supply, and deposit mobilization are positive and significant to capital formation in Nigeria. The study concluded that financial intermediation substantially spurs the level of capital formation in Nigeria; thus, giving credence to the supply-leading theory in the Nigerian economy. Thus, the study recommends that banks boost deposit mobilization and accumulation channels since they promote growth. Also, greater efforts should be made to boost the quantity of cash in circulation, since this improves Nigeria's capital creation

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