PERIOD BASED CAUSALITY TEST OF EFFECT OF NIGERIAN BANKING REFORMATION VARIABLES ON THE ECONOMIC GROWTH (1986-2015)

Abstract

This study tried to evaluate and compare the effect of various Banking reformation variables within the reformation  periods considered on the economic growth of Nigeria using empirical literature to establish the gap existing in the various research work carried out on the area, granger causality test is used to describe and evaluate the contributions of these various reformation variables within the periods studied on the Economy, specifically considered are different banking repositioning that started from 1892 with free banking era, the  regulated period that ended 1985.The deregulated period of 1986 to 1994, the policy reversal period that stated from 1994, Universal Banking (UB) model adopted in 2001, and Consolidation period that started 2004 and Payment Reform period introduced in 2008. There are other reforms in the banking sector that took place in recent period like:- Asset Management Corporation of Nigeria (AMCON) introduced in 2010, introduction of the Non-Interest Banking in Nigeria in 2012, Woman Empowerment in Banking industry introduced in 2012 and many others. Secondary data were sourced from CBN Statistical Bulletin and related research papers. The research design adopted in this study falls within the paradigm of an export fact design type. The data collected from the secondary records were analyzed using Granger Causality Test, while examined the effect of the independent variables on the dependent variables. The study revealed that all the variables studied (DIR, LIR, LQR, CPS ,FID, EXR, NLMMI and NLM2) jointly do not granger cause GDP  under Deregulation period, Reversal of Deregulation period, Universal Banking period and they do not significantly related to dependent variable(GDP). But they jointly Granger Cause GDP under Consolidated Banking period and they also jointly have significant relationship with dependent variable (GDP). The researcher, therefore recommend that policymakers should be designing proactive micro and macroeconomic measures for solving emerging economic problems in Nigeria. The regulatory bodies should ensure continuity of policies made, mostly those ones that are effective like bank consolidation policy. Nigerian policy makers should not be copying expatriates and developed economies in promulgation of Nigerian banking laws because they do not succeed here, instead, they should originate our own Banking laws, considering Nigerian economic factors,  background and environment.