Does Rural Financial Development Spur Economic Growth? Evidence from Nigeria

Mr Sani Ibrahim, Saifullahi (2013): Does Rural Financial Development Spur Economic Growth? Evidence from Nigeria.

Abstract

Robust economic development is not possible without financial deepening more especially in rural community where vast majority of the populace of Less Developed Countries (LDCs) resides. This paper analyses the impact of rural financial development on economic growth of Nigeria. The study uses time series data covering 1980 to 2011 periods paving the way for the application of Johansen and Juselius model of cointegration to detect the long-run relation among the variables in question. Accordingly, Dynamic Ordinary Least Square (DOLS) method was applied to unveil relationship between rural financial development and economic growth. The cointegration test result reveals the presence of long run relation between rural financial development and economic growth of Nigeria. Moreover, the DOLS results found a significant positive relationship between rural financial development and the growth of Nigerian economy. It has been confirmed in this study that rural finance serves as an engine of growth in the country. It could therefore be concluded that enhancing productive credit especially in rural areas could free the disadvantaged entrepreneur and thus enable them to contribute immensely toward the growth of Nigerian economy. The study therefore recommends among other things, barriers to the productive credit allocation in rural community should be reduced to the barest minimum.

• Item Type: MPRA Paper
• Language: English
• Keywords: Rural development, credit allocation, financial development
• Subjects: E - Macroeconomics and Monetary Economics > E4 - Money and Interest Rates > E44 - Financial Markets and the Macroeconomy; O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development > O16 - Financial Markets ; Saving and Capital Investment ; Corporate Finance and Governance; O - Economic Development, Innovation, Technological Change, and Growth > O5 - Economywide Country Studies > O55 - Africa

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