Financial Deepening and Deposit Mobilization of Commercial Banks in Nigeria: A Time Variant Model
Keywords:
Financial Deepening, Commercial Banks, Deposit Mobilization, Broad Money Supply, Narrow Money Supply.
Abstract
The purpose of this study was to examine the effect of financial deepening on customer deposit of Nigerian commercial banks. Time series data was sourced from Central Bank of Nigeria Statistical Bulletin, from 1981-2017. Percentage of total customers’ deposit to total assets was used as dependent variables while percentage of narrow money supply, broad money supply, money market development, money outside the bank and private sector credit to gross domestic product was used as independent variables. Multiple regression with ordinary least square properties of cointegration, augment Dickey Fuller unit root test, Granger causality test and vector error correction model was used to examine the relationship between the dependent and the independent variables. The regression result found that narrow money supply and money market development have negative effect on total customer’s deposit of commercial banks while private sector credit, broad money supply and money outside the bank have positive effect on customer’s deposit of commercial banks in Nigeria. The unit root test shows that the variables are stationary at first difference; the cointegration test validates the existence of long run relationship while the causality test found no causal relationship. The study concludes that financial deepening has significant impact on total customer deposit. We recommend that policies should be deepened to enhance the performance of the Nigeria financial market.
References
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Obilor, S. I. (2013). The impact of commercial banks' credit to agriculture on agricultural development in Nigeria: An econometric analysis. International Journal of Business, Humanities and Technology, 3(1), 85-95.
Ochanda, M. M. (2014). Effect of financial deepening on growth of small and medium-sized enterprises in Kenya: A case of Nairobi County. International Journal of Social Sciences and Entrepreneurship, 1(11), 191-208.
Odhiambo, N. M. (2009a). Interest Rate Reforms, Financial Deepening and Economic Growth in Kenya: An Empirical Investigation. The Journal of Developing Areas, 43(1), 295-313.
Odhiambo, N. M. (2009b). Financial Deepening and Poverty Reduction in Zambia: an Empirical Investigation. International Journal of Social Economics, 37(1), 41-53.
Omankhanlen, A. E. (2012). The financial sector reforms and their effect on the Nigerian economy. Economy Transdisciplinarity Cognition, 15(2), 45-57.
Onyemachi, C. (2012). An empirical analysis of financial deepening and economic growth (1986-2010). Ahmadu Bello University, Economics, Zaria.
Osinsanwo, B.G. (2013). The macroeconomic effect of financial development on economic growth in Nigeria: A Long Run Analysis, 1970-2011. Journal of African Macroeconomic Review, 4, 227-245.
Shaw, E.S. (1973). Financial Deepening in Economic Development. New York: Oxford University Press.
Sindani, M. (2013). The impact of financial sector deepening on economic growth in Kenya. International Journal of Social Sciences and Project Planning Management, 1(1), 41-64.
Toby, A. J., & Peterside, D. B. (2014). Analysis of the Role of Banks in Financing the Agriculture and Manufacturing Sectors in Nigeria. IMPACT: International Journal of Research in Business Management (IMPACT: IJRBM), 2(2), 9-22.
Tomola, M. O., Adebisi, T. E., & Olawale, F. K. (2010). Bank lending, economic growth and the performance of the manufacturing sector in Nigeria. European Scientific Journal, 8(3), 19-36.
Were, M., Nzomoi, J., & Rutto, N. (2012). Assessing the impact of private sector credit on economic performance: Evidence from sectoral panel data for Kenya. International Journal of Economics and Finance, 4(3), 182-190.
Abu-Zeinab, A. (2013). Patterns of bank credit allocation and economic growth: The case of Denmark 1736 -2012. Lund Papers in Economic History(General Issues 131), 1-35.
Akabom-Ita, A. (2012). Impact Analysis of Interest Rate on the Net Assets of Multinational Businesses in Nigeria. Research Journal of Finance and Accounting 3 (7),146-167.
Akpansung, A. O. & Babalola, S. J. (2012). Banking Sector Credit and Economic Growth in Nigeria: An Empirical Investigation. CBN Journal of Applied Statistics, 2 (2):51 -62.
Avinash, R., & Mitchell-Ryan, T. (2009). An assessment of the impact of the sectoral distribution of commercial bank credit on economic growth and development in Trinidad and Tobago. CBB Working Paper, 2010.Trinidad and Tobago: Central Bank of Trinidad and Tobago.
Ayadi, R., Arbak, E. S., & De Groen, W. P. (2013). Financial development, bank efficiency and economic growth across the Mediterranean. MEDPRO Technical Report No. 30.
Bhusal, B. P. (2012). Impact of financial policy reforms on financial development and economic growth in Nepal. International Journal of Business and Social Sciences, 3(14), 33-45.
Bossone, B., & Lee, J.-K. (2004). In Finance, Size Matters: The "Systematic Scale Economies" Hypothesis. IMF Staff Papers, 51(1), 19-46.
Capannelli, G.J. (2009). Developing Indicators for Regional Economic Integration and Cooepration. Asian Development Bank, No. 33.
Chortareas, G. E., Garza-Garcia, J. G., & Girardone, C. (2011). Financial deepening and bank productivity in Latin America. The European Journal of Finance,17(9-10), 811-827.
Christian, L.N. (2013). Financial deepening dynamics and implication for financial policy Coordination in a Monetary Union: The Case of WAEMU. African Economic Conference 2013 Johannesburg.
Diamond, D.W. (1983). Bank Runs, Deposit Insurance and Liquidity. Journal of Political Economy, University of Chicago Press.
Dickey, D.A., Fuller, W.A. (1981). Distribution of the Estimators for Autoregressive Time series with a Unit Root. Journal of the American Statistical Association, 74(366), 427-431.
Fadare, S. O. (2010). Recent banking sector reforms and economic growth in Nigeria. Middle Eastern Finance and Economics, 8, 146-160.
Fafchamps, M., & Schundeln, M. (2011). Local financial development and firm performance: Evidence from Morocco.
Galbis, V. (1997). Financial Intermediation and Economic Growth in Less Developed Countries: A Theoretical Approach. Journal of Development Studies, 13, 58-72
Gujarati, N.D. (2007). Basic Econometrics. New York: McGraw Hill, Inc, 4th Edition.
Hammilton, O.I. and Godwin (2013). Does financial deepening follow supply leading or demand following hypothesis? A Critical Look at the Nigerian Evidence. Journal of Science and Technology , 5, 10-15.
Ikenna, O. D. (2012). Financial Deregulation in Bounding to Credit Mobilisation in Nigeria: A Case for the Real Sectors and SMEs. IOSR Journal of Humanities and Social Science, 5(5), 40-59.
Imoughele, Ehikioya, L., Ismaila, & Mohammed. (2013). Commercial bank credit accessibility and sectoral output performance in a deregulated financial market economy: Empirical evidence from Nigeria. Journal of Finance and Bank Management, 1(2), 36-59.
Jhingan, M. L. (2004). Monetary Economics (6th ed.). New Delhi, India: Vrinda Publications (P) Ltd.
King, R. G. & Levine, R. (1993). Finance, Entrepreneurship, and Growth: Theory and Evidence. Journal of Monetary Economics, 32, 513-542.
Levine, R., & Loayza, N. (1999). Financial Intermediation and Growth – Causality and Causes. World Bank Policies Research Working Paper No. 2059–1999.
Lucky, A. L., & Uzah, C. K., (2017). Monetary Policy Transmission Mechanisms and Domestic Real Investment in Nigeria: A Time Series Study 1981-2015. IIARD International Journal of Economic and Financial Management, 2 (2), 29 – 59.
Mathiesun, D.J. (1980). Financial Reform and Stabilization Policy in a Developing Economy. Journal of Development Economics , 7, 359-395.
McKmnon, R.I. (1973). Money and Capital in Economic Development. The Brookings Institution, Washington DC.
Nazmi, N. (2005). Deregulation, financial deepening and economic growth: The case of Latin America. The Quarterly Review of Economics and Finance, 45, 447-459.
Ndebbio, J.E.U. (2004) .Financial Deepening, Economic Growth and Development: Evidence from Selected SSA Countries. African Economic and Research Consortium, RP142.
Newman, E. (2012). Impact of Interest Rate Policy and Performance of Deposit Money Banks in Nigerian Global Journal of Management and Business Research; 12 (21), 16-34.
Ngerebo-a, T.A., & Lucky, A. L., (2016). Interest Rates and Deposit Money Bank’s Profitability: Evidence from Nigeria (1980 – 2014). International Journal of Empirical Finance, 5 (1), 22 – 35.
Nwanyanwu, O. J. (2012). Analysis of banks' credit on Nigeria’s economic growth (1992 - 2008). Jos Journal of Economics, 4(1), 43 - 58.
Obilor, S. I. (2013). The impact of commercial banks' credit to agriculture on agricultural development in Nigeria: An econometric analysis. International Journal of Business, Humanities and Technology, 3(1), 85-95.
Ochanda, M. M. (2014). Effect of financial deepening on growth of small and medium-sized enterprises in Kenya: A case of Nairobi County. International Journal of Social Sciences and Entrepreneurship, 1(11), 191-208.
Odhiambo, N. M. (2009a). Interest Rate Reforms, Financial Deepening and Economic Growth in Kenya: An Empirical Investigation. The Journal of Developing Areas, 43(1), 295-313.
Odhiambo, N. M. (2009b). Financial Deepening and Poverty Reduction in Zambia: an Empirical Investigation. International Journal of Social Economics, 37(1), 41-53.
Omankhanlen, A. E. (2012). The financial sector reforms and their effect on the Nigerian economy. Economy Transdisciplinarity Cognition, 15(2), 45-57.
Onyemachi, C. (2012). An empirical analysis of financial deepening and economic growth (1986-2010). Ahmadu Bello University, Economics, Zaria.
Osinsanwo, B.G. (2013). The macroeconomic effect of financial development on economic growth in Nigeria: A Long Run Analysis, 1970-2011. Journal of African Macroeconomic Review, 4, 227-245.
Shaw, E.S. (1973). Financial Deepening in Economic Development. New York: Oxford University Press.
Sindani, M. (2013). The impact of financial sector deepening on economic growth in Kenya. International Journal of Social Sciences and Project Planning Management, 1(1), 41-64.
Toby, A. J., & Peterside, D. B. (2014). Analysis of the Role of Banks in Financing the Agriculture and Manufacturing Sectors in Nigeria. IMPACT: International Journal of Research in Business Management (IMPACT: IJRBM), 2(2), 9-22.
Tomola, M. O., Adebisi, T. E., & Olawale, F. K. (2010). Bank lending, economic growth and the performance of the manufacturing sector in Nigeria. European Scientific Journal, 8(3), 19-36.
Were, M., Nzomoi, J., & Rutto, N. (2012). Assessing the impact of private sector credit on economic performance: Evidence from sectoral panel data for Kenya. International Journal of Economics and Finance, 4(3), 182-190.
Published
2018-06-13
How to Cite
Nwangolo, A.-, & Ogechi, B. (2018). Financial Deepening and Deposit Mobilization of Commercial Banks in Nigeria: A Time Variant Model. Indian Journal of Finance and Banking, 2(2), 1-14. https://doi.org/10.46281/ijfb.v2i2.94
Section
Regular Research Article/ Short Communication Article
Copyright (c) 2018 Azu-Nwangolo, Blessing Ogechi
This work is licensed under a Creative Commons Attribution 4.0 International License.
