Analysis of Micro-Financing and Economic Growth in Nigeria

Aimed at evaluating the nature of interrelationships between Nigeria's economic growth and micro-Financing allocations to classified sectors of economic activity, this study employs Augmented Dickey-Fuller Johansen's Co-integration, Error Correction Model and Standard Pair-Wise Granger Causality tests. Data was sourced from Central Bank of Nigeria's Statistical Bulletin over the period of 1992 to 2014. The results reveal stationarity of the time series data and significant long run relationship among the study variables. No significant causalities are found between Nigeria's gross domestic product and microcredit allocations to agriculture/forestry and other mining/quarrying sectors. On the other hand, micro-Financing allocated to other manufacturing/food processing as well as real estate/construction are found to witness significant causalities with Nigeria's gross domestic product. The causalities flow from gross domestic product to micro-Financing allocated to these sectors. On the whole, Nigeria's GDP and micro-Financing allocated to transport/general commerce sector are found to have significant bi-directional causality thereby, mutually promoting and reinforcing each other The study concludes that microcredit operations are exerting enlarged influence in Nigeria by becoming significant in increasing number of sectors and recommends improvements in micro-Financing and microcredit products which must meet sector specific needs of enterprise. Finally, reduction in tax and levy rates are recommended in favour of operating microcredit institutions in order to minimize their operating costs and boost their capacities to contribute more to Nigeria's economic growth.