Munich Personal RePEc Archive

An Analytical Review of Financial Intermediation in the Rural Areas of Nigeria

Muhammad Aliero, Haruna and Sani Ibrahim, Saifullahi (2012): An Analytical Review of Financial Intermediation in the Rural Areas of Nigeria. Published in: Studies in the State of the Nigerian Economy (2012): pp. 323-333.

[img]
Preview
PDF
MPRA_paper_87567.pdf

Download (281kB) | Preview

Abstract

This study analyses financial intermediation in the rural financial sub-sector of Nigerian economy. In achieving the objective of the paper, we investigate the relationship between the total deposit mobilized and the total loan advanced by the formal bank branches located in the rural areas of Nigeria from 1982-2009. The study uses time series secondary data collected from various issues of the Central Bank of Nigeria (CBN) statistical Bulletin, the data was analysed using the Augmented Dickey Fuller unit root tests and Johansen cointegration tests allowing for using fully modified Ordinary Least Square (OLS) method. The study found that rural deposit has a significant positive influence on rural loans while the influence of interest rate is positive but not significant. The result of Pearson Product Moment Correlation revealed a fair correlation between deposits mobilised and credits allocated in rural areas of Nigeria. As such, 48% of the deposit mobilised is given out to rural customers as loan. The study concluded that formal bank branches in the rural areas have done fairly well in terms of credit creation although there is still room for expansion. However, limited presence of financial institutions in the rural areas is the major problem inhibiting financial intermediation in the rural areas of Nigeria. The study, therefore, recommends that the CBN should direct all rural banks to give out at least 60% of their deposit as the loan to rural borrowers while linkage banking should be used for the very remote communities where formal bank branches could not be located.

UB_LMU-Logo
MPRA is a RePEc service hosted by
the Munich University Library in Germany.