Financial System Stability, Financial System Vulnerability and Private Investment in Nigeria

AFRAG034

Financial System Stability, Financial System Vulnerability and Private Investment in Nigeria

Atseye, Fidelis Anake Ibor, Bassey I

Akeh, Monica Ukongim

Department of Banking and Finance Faculty of Management Sciences University of Calabar, Calabar, Nigeria Corresponding Author: anakefidel@yahoo.co.uk and anakefidel@unical.edu.ng

Abstract

Theoretical predictions indicate a bio- directional nexus between financial system growth and real economic growth with implications for the value of investment in the productive sector of the economy. Against this backdrop, the paper examined the effect of financial system stability and financial system vulnerability on private investment in Nigeria for the period spanning 1990-2020. Quarterly time series data were collated from the Central Bank of Nigeria (CBN) statistical bulletin and the National Bureau of Statistics (NBS) digest. Data were subjected to pre-estimation tests such as Argument Dickey-Fuller (ADF) and Johnson Co-integration, and consequently analyzed using the OLS multiple regression technique. Results indicated a significant effect of key independent variables such as financial system stability, interest rate and  financial system vulnerability on private investment. Based on these results, it was recommended that regulators of the financial system collaborate with managers of deposit money banks and allied credit institutions to reduce the volume of non-performing loans vis-a-vis loan portfolio. Additionally, increase in the capital based of financial institutions as well as assets would guarantee financial stability and investment in the private sector.

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