Financial Deepening and Entrepreneurial Development in Nigeria: Evidence from 1981–2024

Sydney Clever Keremah

doi:10.59413/eafj/v5.i1.14

Authors

Sydney Clever Keremah Department of Accounting and Finance, Faculty of Management and Social Sciences , Margaret Lawrence University Author

DOI:

https://doi.org/10.59413/eafj/v5.i1.14

Keywords:

Financial Deepening, , Entrepreneurial Development, Non-Oil GDP, Credit to Private Sector

Abstract

This study investigates the relationship between financial deepening and entrepreneurial development in Nigeria using annual data from 1981 to 2024. Non-oil GDP is used as a proxy for entrepreneurial development, while financial deepening is captured through money supply, credit to the private sector, lending rate, and exchange rate. The analysis employs various statistical tests, such as the Johansen cointegration test, Vector Error Correction Model (VECM), and Granger causality, to examine both short- and long-run dynamics. The results reveal a stable long-run relationship among the variables. Money supply and exchange rate positively influence entrepreneurial development, while credit to the private sector shows a negative long-run effect, indicating inefficiencies in credit allocation. Lending rates appear largely insignificant. Granger causality results show that non-oil GDP drives changes in money supply, private sector credit, and exchange rate, suggesting that entrepreneurial growth plays a significant role in shaping financial sector dynamics. The study concludes that entrepreneurial development is a central driver of Nigeria’s financial and monetary dynamics and recommended that financial institutions should make it easier for small and medium-sized enterprises (SMEs) and entrepreneurs to access credit. Also, government policies should focus on supporting businesses in areas such as agriculture, manufacturing, and services.

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