RELATIVE IMPACT OF FINANCIAL SECTOR REFORMS ON AGRICULTURAL AND MANUFACTURING SECTOR GROWTH IN NIGERIA

TABLE OF CONTENTS

Title page

Approval page

Certification

Dedication

Acknowledgement

Table of contents

List of Tables

Abstract

CHAPTER ONE

INTRODUCTION

1.1  Background to the study

1.2  State of the problem

1.3  Research Questions

1.4 Research Objectives

1.5 Research Hypotheses

1.6 Significance of the Study

1.7 Scope of the Study

CHAPTER TWO

2.1 Financial Sector Reforms in Nigeria

2.2 Reform of Financial Sector and Links with Agricultural and Manufacturing Sector in Nigeria

2.2.1 Trend in Agricultural Sector Growth and contribution to GDP

2.2.2 Trend in Manufacturing Sub-Sector Growth and contribution to GDP

CHAPTER THREE

LITERATURE REVIEW

3.1       Conceptual Literature

3.2       Theoretical Literature

3.2.1 Financial Repression Theory

3.2.2 Financial Liberalization Theory

3.2.3 The Post Keynesian Theory

3.2.3 Neo –Structuralist Theory

3.3       Empirical Literature

3.4       Limitation of Previous Studies

CHAPTER FOUR

METHODOLOGY

4.1       Theoretical Framework

4.2       Model Specification

4.3       Variable Description

4.4       Estimation Procedure

4.5       Justification of the Model

4.6       Data Sources

CHAPTER FIVE: DATA PRESENTATION AND ANALYSIS

5.1       Introduction

5.2       Descriptive Analysis

5.3       Stationarity Test

5.4       Co-integration Test

5.5       Model One : OLS result for impact of financial sector reforms on agricultural sector output

5.5.1  Economic Criteria (Apriori expectation)

5.5.2    Gross Capital Formation

5.53  Ratio of credit to Private sector (CPSGDGDP)

5.5.4  Average annual rainfall (ARR)

5.5.5    Real interest rate (RINR)

5.5.6  Interest Rate spread (SINT)

5.5.7  Real exchange rate (EXRATE)

5.5.8  Financial Sector reform (DUM)

5.5.9  Effect of financial sector reforms on financial indicators

5.5.10 Agricultural Sector contribution to GDP (AGGDP)

5.5.11 Model fit and diagnostic check

5.6       Model Two: OLS for impact of financial  sector reforms on manufacturing sector output

5.6.1  Gross capital formation (GCF)

5.6.2    Ratio of Credit to Private sector  (CPSGDP)

5.6.3  Manufacturing capacity Utilization (MANCU)

5.6.4  Ratio of broad money supply to GDP (M2GDP)

5.6.5  Real interest rate (RINR)

5.6.6  Interest rate spread (SINR)

5.6.7  Real exchange rate (EXRATE)

5.6.8  Financial sector reform (DUM)

5.6.9  Manufacturing sector contribution to GDP (MANGDP)

5.6.10 Model fit and diagnostic check

5.7  Comparison of impact of key financial indicators on agricultural and Manufacturing sector output

5.8       Evaluation of research hypotheses

CHAPTER SIX

SUMMARY, CONCLUSION AND POLICY RECOMMENDATION

6.1       Summary

6.2       Conclusion

6.3       Policy recommendation

            REFERENCE

            APPENDIX

ABSTRACT

The study investigates relative impact of financial sector reforms on agricultural and manufacturing sector growth in Nigeria. To guide the study, Ordinary Least Square technique was adopted and Eviews 8.0 econometric software was utilized for the analysis. A time series quarterly data sourced from Central Bank of Nigeria Statistical Bulletin 2009 and 2013 and it covered the period 1970-2013 was used for the analysis. After carrying out necessary pre- and post diagnostic test, the result shows that gross fixed capital formation and credit to private sector ratio to GDP has positive but insignificant relationship with agricultural and manufacturing sector output. While real interest rate, manufacturing capacity utilization and financial sector reform dummy were positive and significant, interest rate spread, real exchange, average annual rainfall and money supply ratio to GDP displayed negative relationship with agricultural and manufacturing sector output. Upon comparison of impact of key financial indictors on agricultural and manufacturing sector output, the result revealed that impact of real interest rate and financial sector profitability index (SINR) in the pre- and post-financial sector reform were significant in each sector. In contrast, while impact of real exchange rate does not significantly influence agricultural sector output, it subsequently became significant in the model for manufacturing sector output. The study however concludes that domestic investment on infrastructure and credit facility to the sectors was sub-optimal. Secondly, participants in the sectors were made worse-off by the reform. Extensive review of existing policies, provision of incentives, accessible and affordable funding was recommended by the study.

CHAPTER ONE

INTRODUCTION

1.1              Background to the Study

The financial sector is central to any economy of the world, and the ripples of the sector’s downturn are usually felt in all other sectors of the economy. Lin, Sun, and Jiang (2009) hinted that the structure of the financial sector reveals the nature of the productive activities in such economy. It is therefore not surprising that Nigeria like most developing economies, has adopted various forms of policy and institutional reforms since independence to ensure that the sector remains in good health. The success story is not the same everywhere though, while some countries have been successful in eliminating underlying distortions and restructuring their financial sectors in the beginning of the new millennium, in some cases financial sectors remains underdeveloped (Dileep, Rambabu, & Bhisma, 2007). Financial sector reforms, especially a comprehensive one, would be a turnaround approach to cope up with the threats of global competitiveness in carrying out the financial services. The country has witnessed a wave of reform in the financial sector. It is pertinent to point out at this juncture that financial sector is comprised of banks and non-bank financial institutions (money and capital markets) along with other financial system that supports them.

As the financial reform phenomena advances, so do the understandings of it advance. Financial reform as Gencalo (2011) puts it “is a multifaceted phenomenon”. According to Ebong (2006), they are deliberate policy response to correct perceived or impending financial crises and subsequent failure. In other words, the different interventions of the federal government through the central bank of Nigeria and other financial institutions regulators to enable the financial sector and the economy recover from actual or impending disaster is what is here referred to as financial reform. On the expectations on financial reforms, Edirisuriya (2008) reported that financial sector reforms are expected to promote a more efficient allocation of resources and ensure that financial intermediation occurs as efficiently as possible. By implication, financial sector reforms brings competition in the financial markets, raises interest rate to encourage savings, thereby making funds available for investment, and hence lead to economic growth (Asamoah, 2008). The different ways in which these competitiveness have been kindled includes deregulation of interest rates, exchange rate, entry/exit into the banking business, establishment of the Nigeria Deposit Insurance Corporation (NDIC), strengthening the regulatory and supervisory institutions, upward review of.....

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