A TIME SERIES ANALYSIS ON THE EFFECT OF BANKING REFORMS ON NIGERIA’S ECONOMIC GROWTH

The study examines the effect of banking reforms on the economic growth of Nigeria from 1986 to 2010. The model used in the study proxy Gross Domestic Product (GDP) as being dependent on Interest Rate Margin (IRM), Credit to Private Sector (CPS), Savings (SAV) and Inflation (INF), all representing banking reform indices. The econometric techniques of Augmented Dickey-Fuller (ADF) Unit Root test, Johansen Co-integration test and Error Correction Mechanism (ECM). The empirical result shows the presence of long run relationship among the variables. The overall findings suggest that banking reforms has not adequately and positively impacted on the economy. The study recommends that the regulatory and supervisory framework should be further strengthened, healthy competition promoted among banks and interest rate policy should be made to stimulate savings through high real deposit rates and lending rate made reasonable as possible in order to encourage investors to borrow to participate in productive activities.