Banking, Money Supply and Economic Growth: An Empirical Analysis from Nigeria

Purpose This study explores the relationships between banking, money supply, and economic growth through an empirical analysis of Nigeria. Methodology Data from 1986 to 2021was gathered from the World Development Indicators and analyzed using the Auto-Regressive Distributed Lag model. The variables considered in this research include money supply, banking, and economic growth. Findings The results demonstrate that economic growth is consistent with different variables employed. Remarkably, outstanding deposits at commercial banks (OuD) also positively affected GDP, also in the long run, a rise in OuD by a percentage led to a 23.92% GDP increase. This indicates that, on average, OuD has a considerable long-term effect on GDP. Additionally, RcR has a direct impact on economic growth, the long-run results showed that the OuL had a positive effect on GDP irrespective of the country region. Initially, it was found that they positively contributed to economic growth, which in turn justifies the purpose of the banking system, as well as supports the intermediation theory of banking. Conclusion According to this study, based on the ARDL model, the role of the money supply in economic growth cannot be overstated. Additionally, the disequilibrium correction terms demonstrate that Nigeria is trending toward growth targeting, one of the country's main economic goals, albeit at a slower pace.