Financial Intermediation, Growth of Industries and the Paradox of Corruption in Nigeria
DOI:
https://doi.org/10.29145/jqm.92.03Keywords:
financial intermediation, industrial growth, corruption, SVAR, NigeriaAbstract
Industrial growth often acts as a catalyst for economic performance. However, for industries to flourish, there must be a robust financial sector that can offer a variety of financial intermediary assets. These assets could be loans, investments, insurance products, and other financial services that support businesses in managing risks and expanding their operations. By providing these financial tools, the sector can help industries secure the necessary capital, manage liquidity, and mitigate various risks, ultimately leading to a more dynamic and resilient economy. Amongst such risks is corruption, which has been identified as the predominant factor in the Nigerian economy. The interplay of corruption in the relationship between financial intermediation and the growth of industries in Nigeria was investigated through the use of Structural Vector Autoregressive Modeling technique. Nigerian dataset on the growth of industries, corruption index, loans and advances, lending rate and domestic credit from 1996 to 2023 was utilized. The study found that corruption and financial intermediation affected industrial growth positively, while domestic credit had both negative and positive effects on industrial growth and financial intermediation over time; corruption affected lending rates and loans positively; increases in financial intermediation resulted in decreasing corruption in Nigeria; increase in corruption and loan resulted in increasing lending rates, while domestic credit transmits a reduction effect on other financial intermediation indicators and corruption, to increase industrial growth. It is therefore, recommended that domestic credit and loans be increased while ensuring lower lending rates to minimize corruption for improved industrial growth in Nigeria.
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