THE EFFECT OF MACROECONOMIC VARIABLES ON FINANCIAL SECTOR DEVELOPMENT IN NIGERIA

This paper examines the macroeconomic variables that affect financial sector development (FSD) in Nigeria. The aim of the paper is to analyse whether inflation, money supply, financial openness, trade openness and government expenditure significantly affects FSD in Nigeria. The period covered by the study is 1984-2017. The data was analysed using Auto Regressive Distributive Lag (ARDL) model. Ratios of private sector credit (PSC) to GDP was used as proxy of FSD. The results revealed that money supply, interest rate, financial openness and inflation significantly explain FSD in Nigeria. The study recommends a closer monitoring, formulation of adequate policies and creating sustainable institutions to take advantage of the benefits of these significant determinants by the relevant authorities especially trade and financial openness.