Impact of Financial Intermediation on Manufacturing Sector Output In Nigeria

Iheanyichukwu Emmanuel Nkwa, Monday Dickson Osadolor, Arinze Emmanuel Izuchukwu, Chibuike Gabriel Offor, Jide Sunday Oyewole, Oluwagbenga Joseph Abudu

Abstract

This paper examines the impact of financial intermediation on manufacturing output in Nigeria between 2012 and 2021. The actions of financial intermediation bore the names of deposit mobilisation, credit provision to the manufacturing industry, and the rate of interest. Through ordinary least squares regression analysis, the study found that deposit mobilisation has a positive and significant effect on manufacturing industry output, with a p-value of 0.0025, which is vital at the 1% level. Credit extension to the manufacturing sector was also observed to have a positive and significant impact on the sector's output, with a p-value of 0.0421, which is statistically significant at the 5% level. The value of the coefficient of determination (R²) of 0.941684 indicates that the independent variables explain 94.16% of the variation in manufacturing sector output. The study has concluded that financial intermediation plays a pivotal role in realising the potential of the manufacturing sector in Nigeria. It has been recommended that the Central Bank of Nigeria design monetary policies with a view to increasing financial savings and seek ways to provide incentives to banks in an effort to encourage more savings to be deposited and lent to the manufacturing sector.


10.22178/pos.122-6


Keywords


Financial Intermediation; manufacturing sector; Deposits mobilisa-tion; credit extension; Nigeria

Full Text:

PDF


References


1. Agbada, A. O., & Osuji, C. C. (2013). An empirical analysis of trends in financial intermediation and output in Nigeria. Global Journal of Management and Business Research Finance, 13(9).

2. Abere. M. A., Akosile, M. O., Adegoke, T. D., & Adebayo, A. O. (2022). The Effect of Financial Intermediation on Economic Growth in Nigeria. Fuoye Journal of Finance and Contemporary Issues, 2(1), 21-30.

3. Ezirim, C. B., & Muoghalu, M. I. (2006). Financial Management Imperatives of Intermediation Function of Financial Institutions: Empirical Evidence From Nigeria. Banks and Bank Systems, 1(3).

4. Anigbogu, T. U., Okoli, I. M., & Nwakoby, N. P. (2015). Financial Intermediation and Small and Medium Enterprises Performance in Nigeria (An Aggregated Analysis: 1980-2013). European Scientific Journal 11(28), 257-272.

5. Loto, M. A. (2012). Global Economic Downturn and the Manufacturing Sector Performance in the Nigerian Economy (A Quarterly Empirical Analysis). Journal of Emerging Trends in Economics and Management Sciences, 3(1), 38-45.

6. Mesagan, E., Olunkwa, N., & Yusuf, I. (2018). Financial Development and Manufacturing Performance: The Nigerian Case. Studies in Business and Economics, 13(1), 97–111. doi: 10.2478/sbe-2018-0009

7. Hamadi, H., & Bassil, C. (2015). Financial Development and Economic Growth in the MENA Region. Comparative Economic Studies, 57(4), 598–622. doi: 10.1057/ces.2015.21

8. Onye, K. U., Gibson, L. D., & Etuk, S. M. (2023). On the Manufacturing Sector Performance and Nigeria's Economic Growth. International Journal of Social Sciences, 15(1).

9. Ifeanyichukwu, M. A., Okafor, N. I., & Omeh, P. H. (2018). Contributory Pension Scheme and Management of Retirement Benefits in the University of Nigeria, Nsukka: An Ethical Appraisal. American-Based Research Journal, 7(3).

10. Hogendorn, J., & Okigbo, P. N. C. (1982). Nigeria's Financial System: Structure and Growth. African Economic History, 11, 197. doi: 10.2307/3601239

11. Ekong, C. N., & Okon, U. A. (2016). Financial Intermediation and Economic Growth in Nigeria (1970-2013). Retrieved from https://www.researchgate.net/publication/359803157_Financial_Intermediation_and_Economic_Growth_in_Nigeria_1970-2013

12. Acha, I.A. (2011) Does Bank Financial Intermediation Cause Growth in Developing Economies: The Nigerian Experience. International Business and Management, 3, 156-161.

13. Onwe, J. C., Adeleye, N., & Okorie, W. (2018). ARDL empirical insights on financial intermediation and economic growth in Nigeria. Journal of Business & Economic Management, 6(12).

14. Ogar, A., Nkamare, S. E., & Effiong, C. (2014). Commercial Bank Credit and Its Contributions to the Manufacturing Sector In Nigeria. Research Journal of Finance and Accounting, 5(22).

15. Nduka, A. J. (2025). Manufacturing sector and economic development of Nigeria. SSRN Electronic Journal. doi: 10.2139/ssrn.5236589

16. Imoughele, L. E., & Ismaila, M. (2014). The impact of commercial bank credit on the growth of SMEs in Nigeria (1986-2012). Journal of Educational Policy and Entrepreneurial Research, 1(2), 251-261.

17. Smith, A. (1776). An Inquiry into the Nature and Causes of the Wealth of Nations. Strahan.

18. Ricardo, D. (1817). On the Principles of Political Economy and Taxation. John Murray.

19. Onodugo, V. A., Kalu, I. E., & Anowor, O. F. (2013). Financial Intermediation and Private Sector Investment in Nigeria. Research Journal of Finance and Accounting 4(12), 47–54.

20. Ogunsakin, S. (2014). The Nigerian financial sector and manufacturing industries. IOSR Journal of Applied Chemistry, 7(3), 41–46. doi: 10.9790/5736-07314146

21. Ademola, A. F., & Marshal, O. T. (2018). Financial Deepening and the Performance of Manufacturing Firms in Nigeria. Canadian Social Science, 14(6), 87–96. doi: 10.3968/10395

22. Ikechukwu, N., & Chijindu, A. (2016). The Role of Non-Bank Financial Institutions in the Financial Intermediation Process in Nigeria (1992-2014). British Journal of Economics Management & Trade, 14(4), 1–15. doi: 10.9734/bjemt/2016/283597

23. Doguwa, S. I., Olowofeso, O. E., Uyaebo, S. O., Adamu, I., & Bada, A. S. (2014). Structural Breaks, Cointegration, and the Demand for Money in Nigeria. CBN Journal of Applied Statistics, 5(1), 15-33.

24. Ogbuabor, J. E., & Malaolu, V. A. (2013). Size and Causes of the Informal Sector of the Nigerian Economy: Evidence from the Error Correction Mimic Model. Journal of Economic and Sustainable Development, 4, 85-103.


Article Metrics

Metrics Loading ...

Metrics powered by PLOS ALM

Refbacks

  • There are currently no refbacks.


Bookmark and Share


Copyright (c) 2025 Iheanyichukwu Emmanuel Nkwa, Monday Dickson Osadolor, Arinze Emmanuel Izuchukwu, Chibuike Gabriel Offor, Jide Sunday Oyewole, Oluwagbenga Joseph Abudu

Creative Commons License
This work is licensed under a Creative Commons Attribution 4.0 International License.