CHAPTER ONE

INTRODUCTION

1.1 BACKGROUND TO THE STUDY

The value of economic expansion can't be overemphasized. Economic development is among the

macroeconomic objectives of each and every economy. Consequently, countries, every year,

measure their economic development with the utilization of annual growth rate of the real gross

domestic product as an indicator to measure this economic objective. Therefore, various studies

have been undertaken to perceive the drivers of economic development in Nigeria and South

Africa. The results of these investigations have severally recognized financial intermediation as a

mechanism for development. Financial intermediation is the procedure where financial

intermediaries receive money from the public as deposits and change them into loanable funds

(Agbada & Osuji, 2013). This infers that the financial intermediation process assists with

diverting deposit liabilities from surplus economic units to the banks’ significant interest earner,

loans and advances to the deficit units of the economy.

Banks and other financial institutions are vital for economic development through the financial

services they give. Their intermediation role is a catalyst for economic development and growth.

The gross performance of banking sector overtime is a strong evidence of financial stability in

any country. The degree to which a bank stretches out credit to the public for productive

activities speeds up the pace of a country's economic growth and its long term sustainability.

Financial intermediation, as a process includes the transformation of mobilized deposits

liabilities by financial intermediaries, like, credits such as overdraft and loans or banks into bank

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assets. The fulfillment of a speedy, viable and steady economic development in any country is in

essence a function of the availability of monetary assets in the economy.

The concept of financial intermediation could be characterized as a productive activity in which

an institutional unit incurs liabilities on its own account to gain financial assets by participating

in financial transactions on the market. The role of financial intermediaries is to channel funds

from lenders to borrowers by intermediating between them. Financial intermediation likewise

alludes to the normal flow of money into financial institutions in the form of deposits, which are

then loaned out to gain income (Evans, 2007). Financial intermediation has drawn in discussions

at different sphere of financial studies that there appear to be an agreement in empirical and

theoretical literatures that it has a few basic economic functions at both the microeconomics and

macroeconomic levels. Financial intermediation gives a range of portfolio options for financial

intermediaries and savers with excess funds also. Financial intermediaries can expand their

ability to finance businesses and contribute positively to the overall economy through the

process. The economics of financial intermediation are based and structured on the primary roles

of financial intermediaries.

1.2 STATEMENT OF THE PROBLEMS

Situating this study on Nigeria and South Africa is pertinent on the grounds that notwithstanding

the series of reforms aimed toward strengthening efficiency of financial intermediaries, deficient

funding of the real sector still remains evidenced by the decrease in domestic credit to the private

sector, coupled with the significant liquidity mismatch in economy (CBN, Capital market

dynamics in Nigeria: Structure, transactions cost and efficiency 1980–2006, 2007). Another

problem is that of high concentration of loans to few sectors of the Nigeria and South Africa

economy to the drawback of other sectors (Onudugo, Kalu & Awowor, 2013).

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There is a high concentration of loans to oil and gas and communication sector with credit

exposure within the banking remaining predominantly short date (under a year) highlighting the

bank relative absence of long dated funding. Likewise, there is a noticeable mismatch between

where credit is supplied by sector and the main contributors to the GDP by sector. For instance,

despite agriculture contributing N9.6 Trillion in the first quarter of 2022, only N1.6 Trillion of

bank credit exposure was given to the agricultural sector in 2022 when compared to

manufacturing sector which contribute N6.8 Trillion of total GDP in the first quarter of 2022

which was supplied with N4.2 Trillion of total credit to the private sector in 2022 (CBN,

Quarterly Statistical Bulletin, 11(1), March 2022).

In South Africa, there is likewise a significant mismatch between where credit is supplied by

sector and the main contributors to the GDP by sector. For instance, despite agriculture

contributing 16.4% to the South Africa's GDP, only 6.2% of bank credit exposure was given to

the agricultural sector in 2021 when compared to wholesale and retail trade which contribute

3.9% of total real GDP which was supplied with 31% of total credit to the private sector in 2021

(SARB, Full Quarterly Bulletin, 304, June 2022). Therefore, the problem remains that the real

sector is yet to be effectively connected to the financial intermediaries in Nigeria and South

Africa.

1.3 RESEARCH QUESTIONS

Based on the aforementioned problems, this study seeks to answer the following questions:

i. What effect does Banks’ Total Deposit have on Gross Domestic Product in Nigeria and

South Africa?

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 ii. What effect does Banks’ Total Savings have on Gross Domestic Product in Nigeria and

South Africa?

iii. What effect does Banks’ Credit to Private Sectors have on Gross Domestic Product in

Nigeria and South Africa?

1.4 OBJECTIVES OF THE STUDY

The broad objectives of the study is to examine the effect of financial intermediation on

economic growth using a comparative study of Nigeria and South Africa. While the specific

objectives are to:

i. To determine the effect of Banks’ Total Deposit on Gross Domestic Product in Nigeria

and South Africa.

ii. To determine the effect of Banks’ Total Savings on Gross Domestic Product in Nigeria

and South Africa.

iii. To determine the effect of Banks’ Credit to Private Sector on Gross Domestic Product in

Nigeria and South Africa

1.5 RESEARCH HYPOTHESES

In achieving the aforesaid research objectives and questions, the following hypotheses are

formulated and stated in a null form which will later be put into empirical test.

H01: Banks’ Total Deposit has no significant effect on Gross Domestic Product in Nigeria and

South Africa.

H02: Banks’ Total Savings has no significant effect on Gross Domestic Product in Nigeria and

South Africa.

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H03: Banks’ Credit to Private Sector has no significant effect on Gross Domestic Product in

Nigeria and South Africa.

1.6 SIGNIFICANCE OF THE STUDY

This research work seeks to examine the effect of financial intermediation on economic growth

using a comparative study of Nigeria and South Africa.

The findings and subsequent recommendations if implemented will assist the regulatory

authorities towards developing the right policies that will enhance the growth and development

of the Nigerian economy.

Financial institutions will also benefit if the findings is implemented. Effective and efficient

allocation of credit to sectors will likely lead to increase in investment. As a result of this,

investors will be willing to borrow from the financial institutions to transact their businesses.

This will yield profit to financial institutions as investors will pay back with interest on their

loan.

The study will also be beneficial to bank managers in building up relevant strategies to ensure

high level of customer service which include credit allocation.

It is important to also note that the study will be beneficial to researchers, academicians,

statisticians, students, among others, as it will fill the gap of literature by adding to the existing

ones.

1.7 SCOPE OF THE STUDY

This research work shall have its findings limited to Nigeria and South Africa context. The life

span of data to be used shall range within the period of 1990-2021 (32 years). Also, in the course

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of carrying out this study, some problems were encountered which ranges from non-availability

of relevant recent data to the paucity of available ones.

1.8 ORGANIZATION OF THE STUDY

The research work is segmented into five chapters. The first chapter, Chapter 1, covers

Introduction; background of the study, statement of the problem, research questions, objectives

of the study, research hypotheses, significance of the study, scope and limitation of the study,

organization of the study, and definition of operational terms. The following chapter, Chapter 2,

covers discussions on the Conceptual review: concept of financial intermediation, financial

system versus financial intermediation process, finance and growth, inflation, finance and

growth, concept of credits; the Theoretical review of the study: theory of financial

intermediation, supply leading theory, Goldsmith, McKinnon and Shaw framework, the

structuralist framework; and the Empirical review of the study. Chapter 3 which follows,

contains information on the research methods to be used for the study, and they include research

design, population of the study, sources and methods of data collection, estimation techniques,

model specification and definition of variables.

1.9 DEFINITION OF TERMS

Financial Intermediation: This is a productive activity where an institutional unit incur

liabilities on its own account to gain financial transactions on the market; the role of financial

intermediaries is to channel funds from lenders to borrowers by intermediating between them.

Financial System: This is a system that permits the exchange of funds between financial market

participants like borrowers, investors and lenders. Financial system operates at national and

global levels.

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Economic Growth: This can be characterized as the increment or improvement in the inflation-

adjusted market value of the goods and services produced by an economy over a specific

timeframe.

Gross Domestic Product: This is a monetary measure of the market value of all final goods and

services produced in a particular time span by nations.

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 CHAPTER TWO

LITERATURE REVIEW

2.1 INTRODUCTION

This chapter evaluates existing literature about the effect of financial intermediation on economic

growth using a comparative study of Nigeria and South Africa overtime in order to deepen our

understanding in the same regard. It is systematically arranged to contain 3 sections; the

Conceptual review of the study, the Theoretical review of the study and the Empirical review of

the study.

2.2 CONCEPTUAL REVIEW

2.2.1 Concept of Financial Intermediation

Financial intermediation is the process by which financial service providers such as banks pull

funds from the public as deposits and convert them into loanable funds (Agbada & Osuji, 2013).

This insinuates that the intermediation process assists with diverting deposit liabilities from

surplus economic units to the banks’ significant interest earner, loans and advances to the deficit

units of the economy. Ekong & Okon (2016) consider financial intermediation to be the art of

mobilizing savings from surplus units and directing them into deficit units of the economy for

investment that is productive. Financial intermediation is the art of diverting funds from savers to

investors through the mobilization of funds and guaranteeing efficient transformation of funds

into capital formation that is productive. It includes the transformation of mobilized deposit

liabilities through financial intermediaries, like, credits such as overdraft and loan or banks into

bank assets. It is basically the process by which financial intermediaries receive money from

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depositors and lend some out to borrowers for economic development purposes such as

investment (Andrew & Osuji, 2013). As indicated by Acha (2011), financial intermediation is a

means of diverting funds from lenders which are regarded as the economic surplus unit to

borrowers which on the other hand are regarded as economic deficit unit, through financial

institutions.

Onwe & Adeleye (2018) see financial Intermediation as a process by which a financial

intermediary, like bank, mobilizes bank deposits and changes this deposit money into bank

credits, which is usually overdraft and loans. The process permits financial institutions acting as

an intermediary, to direct funds from surplus economic units (firms and individuals with surplus

savings) to deficit units (organizations and firms needing funds to perform their desired business

activities). Generally, it includes the transformation of bank largest liabilities to bank largest

interest earning assets. As such, the efficiency of the financial system of each and every country

could be said to depend mainly on financial intermediation process since it plays a proactive and

extremely important role in guaranteeing capital accumulation essential for development and

investments that is productive. In fact, the business of banking and global financial system

specifically, prospers on financial intermediaries capacities to take in deposits low interest rate

and lend them at higher rate of interest to organizations.

Financial intermediaries can be grouped into deposit money banks, pure intermediaries like

investment banks and institutional investors. Among every one of the financial intermediaries,

banks are the main financial intermediaries that receive deposits and make loans

straightforwardly to borrowers. The Nigerian financial system is made up of different operations,

markets and institutions that are in the business of offering financial services. These institutions

can be categorized in a wide manner, into capital and money market. While capital market deals

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with long term transactions, the money market on the other hand, is a market wherein short term

financial instruments are traded. The main players in money market are the discount houses and

banks. The intermediation role of banks guarantees the mobilization of inactive funds from

surplus units to deficit sector. Very much like the money market, the capital market is a

significant channel for mobilizing long term funds. The major institutions are the Securities and

Exchange Commission (SEC) known as the apex regulatory body, stock brokerage firms, the

Nigerian Stock Exchange (NSE), the registrars and the issuing houses (Olofin & Udoma, 2008).

2.2.2 Financial System versus Financial Intermediation Process

The financial system comprises of different financial instruments, operators and institutions that

work in a methodical way to guarantee the smooth flow of funds and in this way, accord the

system its uniqueness and character (Nzotta, 2004). It is undeniably true that financial system is

comprised of both market based and bank based segments. As indicated by CBN (1993) the

financial system alludes to the set of rules and regulations, and the collection of financial agents,

institutions and arrangement, that interact with one another and also the rest of the world to

encourage economic development and growth of a country. Financial system is the initial agent

of development of an economy. It accomplishes this through the financial intermediation

process, which involves giving a medium of exchange that is fundamental for the mobilization

and specialization of savings from surplus economic units to deficit economic units. This

arrangement improves productive activities and along these lines, positively impacts economic

growth and aggregate output. The effect of the above is that financial system guarantees the

transfer of savings from those who create them to those who eventually use them for

consumption or investments purpose. It likewise gives a mechanism for receiving and

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transferring of savings by banks and other depository institutions and also a mechanism for

managing and organizing the payments system.

Nonetheless, from all evidence that is available, the degree of development of financial system is

the best indicator of potential development in the general economy. Goldsmith (1969), postulated

that financial system development is of prime significance on the grounds that the financial

superstructure, as both secondary and primary securities, enhances economic performance and

speeds up economic growth, to the degree that it make easier the movement of funds to the best

user. This have an implication in the sense that, financial system will make distinctions against

inefficient funds users. In filling in as a catalyst to economic development; the financial system

aims to accomplish the essential role of resource intermediation. In this context, through

different institutional structures, the system energetically search for and draw in the reservoir of

inactive funds and allocate some to organizations, entrepreneurs, governments and households,

for utilization for different purposes and projects, and investments with a perspective of returns.

2.2.3 Finance and Growth

Evidence in economic and macroeconomic development literature, upholds the view that finance

is fundamental for economic growth. Researchers have centered on investigating the channels

through which financial development stimulates economic growth. Most studies come into

conclusion that financial development improves efficiency in the resources allocation, in this

way, stimulating the growth process. Numerous contentions are proposed on the side of the

efficiency enhancing role of the financial system. One contention is that the financial system

decreases liquidity risk and facilitates risk management by investors and savers. Financial

intermediaries advance to channel savings into long term assets that are more productive than

short term assets (Bencivenga & Smith, 1991). Portfolio diversification for investors and savers

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is facilitated by the financial system. As the financial system grows, more decisions are proposed

to investors, permitting them to allocate resources in additional productive activities (Demergüç-

Kunt & Levine, 1996; Greenwood & Jovanovic, 1990). In economies with financial system that

is not sophisticated, there are less investment opportunities, insinuating a higher likelihood that

resources are ravaged on unproductive uses.

Another contention is focused on the role of the financial system in gathering and processing

information on investment projects (Berthélémy & Varoudakis, 1994; King & Levine, 1993;

Boyd & Prescott, 1986). Financial systems gather and assess information less costly and more

effectively than individual investors due to the economies of scale delighted in by financial

intermediaries. Consequently, the general cost of investment decreases, which stimulate

economic growth. A corollary to this contention is that low financial distortions or development

in the financial system will raise investment cost and consequently, hinder economic growth.

2.2.4 Inflation, Finance and Growth

Several research has given evidence on the view that inflation is not beneficial to long run

economic growth. This evidence tackles the classical view that inflation is positively correlated

with capital accumulation. Mundell (1965) and Tobin (1965) contended that, under the

assumption that capital and money are substitutes, an increase in inflation raises the cost of

holding money and prompts a portfolio shift from money to capital. The premise of this

contention is that inflation fosters savings, decreasing the interest rate, which brings about higher

growth and investment. As opposed to this classical view, various studies show that inflation acts

as a tax on investment, which causes a rise in the effective costs of investment (De Gregorio,

1993, 1996; Jones & Manuelli, 1993; Fischer, 1993; Stockman, 1981). To that end, high inflation

is related with low savings and investment, hence low economic growth.

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Inflation is a restriction on growth since it causes an increase in uncertainty about the

macroeconomic environment, which impedes savings and investment decisions. As a matter of

fact, as Fischer (1993, 1991) proposes, high inflation is evidence of inadequate macroeconomic

policy. Economists recognize two channels in which uncertainty can influence growth (Fischer,

1993). Firstly, a classical view is that high uncertainty because of terrible macroeconomic policy,

decreases the efficiency of price mechanism. This slows down productivity growth and impedes

economic decision making. Secondly, macroeconomic uncertainty is related with low investment

as investors hang tight for its resolution on the off chance that it is perceived accurately or

inaccurately as temporary (Pindyck & Solimano, 1993). Likewise, Fischer (1993) proposes that

uncertainty decreases growth and domestic investment by prompting capital flight.

A significant channel of the adverse effect of inflation on growth that has gotten relatively little

consideration in the literature is the impact of inflation on financial markets. Several studies have

extended the work by McKinnon (1973) and Shaw (1973) who stressed the significance of price

stability as a vital condition for financial intermediaries to advance in the development process.

Inflation impedes financial intermediation by raising moral hazard issues, by worsening

informational issues and by deterring long term contracting in the banking sector (McKinnon,

1991). To this end, high uncertainty makes the financial system more fragile and inefficient in

allocating resources. By making uncertainty, high inflation impedes the financial system role in

maturity transformation, in this manner, restricting the growth process and long term investment.

2.2.5 Concept of Credits

The term credit is utilized particularly to portray the confidence set by a lender in a borrower by

offering a loan mainly in a form of goods securities or money to debtors. Fundamentally, when a

loan is made, the lender is said to have offered credit to the borrower, and he consequently

13
acknowledges the credit of the borrower. Credit is an agreement between two parties, where the

lender supplies securities, money, goods or services in exchange for agreed payments by the

borrower (Onyeagocha, 2001).

Loans are normally repaid by preapproved terms of the agreement as determined in the

repayment plan which states the interest and principal amount that is expected during the tenor of

the loan. In the event that a loan is repayable on demand by a lender, it is known as a demand

loan. On the off chance that a loan is repayable on equable monthly installment, it is stated as an

installment loan. In the event that it is repayable in a lump sum at maturity date of the loan, it is a

time loan. Banks further categorize their loans in accordance to asset financed, like, consumer

loans for consumer things. Others are construction, industrial, personal, mortgage or commercial.

Likewise, loan classification can be unsecured or secured subject to being supported by collateral

(Ozurumba, 2016).

A loan in its usual term, is an oral or written agreement for an interim allocation of a property

from its lender to a borrower who consents to repay it in accordance to terms and conditions of

the agreement, usually with interest for its accepted practice. Nonetheless, in the banking

environment, a loan is regarded as money that is acquired from a government agency or a

lending institution, and paid back at a date in the future (Ozurumba, 2016). A loan is a money

that a bank lends to a borrower for utilization of a credit facility depending on the condition that

the borrower would pay back the money with interest to the bank at a concurred date in the

future (Onyiriuba, 2009).

2.3 THEORETICAL REVIEW

2.3.1 Theory of Financial Intermediation

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As indicated by Allen & Santomero (1998), this theory is intended for institutions that receive

deposits, channel funds to firms and issue insurance policies. The theory states that the growth of

intermediation will in general prompt the progression of financial markets; the development of

the financial sector prompts the expansion of the economy. Banks have been accepting deposits

from households and granting loans to economic agents that demand capital. These economic

agents invest money in economic activities that improve economic growth and create incomes.

Financial intermediation theory completely ignores the traditional Arrow Debreu model of

resource allocation. This model explains that firms and households relate through markets, and

financial intermediations assume no part in this.

As indicated by the theory, markets are perfect and complete. Distribution of resources is, to this

end, effective and there is no space for intermediaries to improve wellbeing. In addition, the

Modigliani-Miller theorem is important in this context as it agrees that financial arrangement

doesn't have an effect, as households can generate portfolios to compensate any circumstance

taken by an intermediary, therefore, intermediation wouldn't generate value (Fama, 1980). Allen

& Santomero (1998), in their perspective, expressed that financial market allow an effective

allocation and financial intermediations having no role to play, is clearly in conflict with what is

noted in practice. This theory is significant on the grounds that it based on financial

intermediation.

2.3.2 Supply Leading Theory

Supply leading theory was proposed by Schumpeter (1911). The supply leading theory postulates

that the presence of financial institutions like banks and the supply of their financial liabilities,

assets and related financial services ahead of demand for them, would give efficient resources

allocation from surplus units to deficit units, subsequently prompting other economic sectors in

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their growth process. The main contention underlying supply leading theory is that financial

deepening is a deciding reason for economic growth. It postulates that optimal resources

allocation is as a result of financials sector development. The supply leading theory recommends

that causality moves from finance to economic growth without feedback reaction from economic

growth. An advanced financial sector is a precondition for economic growth. Mckinnon (1973)

and Shaw (1973) contend that an advanced financial sector limits asymmetric information, and

monitoring and transaction costs; as a result, there is advancement in financial intermediation.

The presence of advanced financial sector improves the generation of financial services as well

as accessibility to them in expectation to their demand by participants in the economy real sector.

The supply leading theory presumes that the economy correspond with growth in the real sector

which is facilitated by financial development.

The supply leading theory presents a chance to prompt real growth through financial means. For

its utilization, analysts believe it is more result oriented at the early stage of a nation's

development than later. As indicated by Keynes, a rise in investment will result to a rise in

income, while individuals' propensity to consume will prompt lack of savings. Even so, in the

economic market when a function of individuals is spending, they turn back part of the income

into the economy. In addition, this theory clarifies that higher interest rates makes it more costly

for firms to borrow money, and that implies that enterprises invest less and when they do,

income is diminished to such an extent that the amount left over for savings will be equivalent to

the smaller amount now invested. In the theory likewise, savings and investment have been

viewed as two important macroeconomics variables with microeconomic groundwork for

accomplishing advancement of employment opportunities and price stability, which add to

sustainable economic growth. The generally accepted perception through which economic

16
growth, savings and investments are related, is that savings add to higher investments, therefore,

higher GDP growth in the short run.

This theory is pertinent to the study since it postulates that a well-functioning financial sector is

important to help bring about growth in the real sector which resultantly prompts economic

development. That is to say, economic development is dependent on how well the financial

sector is developed or deepened. There is a rise in the supply of financial services, as the

financial sector deepens. The financial institutions particularly banks, assist in decreasing risk

faced by businesses and firms in their process, improving the diversification of portfolio and

seclusion of the economy from the adjustment in international economic changes. It likewise

gives linkages to the various sectors of the economy and fosters a high degree of economies of

scale and specialize expertise.

2.3.3 Goldsmith, McKinnon and Shaw Framework

The theory of financial intermediation was first formalized and promoted in the works of

Goldsmith (1969), Shaw (1973) and Mckinnon (1973), who viewed financial markets assuming a

critical role in economic development, ascribing the distinctions in economic growth across

nations to the quality and quantity of services given by financial institutions.

Supporting this view is the conclusion of a research by Nwaogwugwu (2008) and Dabwor (2009)

on the Nigerian stock market development and economic growth, the causal linkage.

Nonetheless, this contrasts with Robinson (1952), who contended that financial markets are

basically hand maidens to domestic industry, and respond in a passive manner to other factors

that produce cross country distinctions in growth. Additionally, there are general likelihood for

supply of finance to move alongside the demand for it. A similar impulse within an economy,

17
which set enterprises on foot, makes owners of wealth, willing to take risks, and when a solid

motivation to invest is restricted by absence of finance, devices are designed to deliver it. The

Robinson school of thought, hence, accepts that economic growth will lead to the expansion of

the financial sector. Goldsmith (1969) attributed the immediate correlation between financial

development and the real per capita GNP level to the positive outcome that financial

development has on fostering more efficient utilization of the capital stock. Also, the process of

growth has feedback consequences for financial markets by generating incentives for additional

financial dvelopment.

Mckinnon (1973) in his study contended that there is a complimentary connection between

money and physical capital that is reflected in money demand. This complimentary connection

as indicated by Mckinnon (1973), joins the process of physical capital accumulation

straightforwardly with the demand for money, on the grounds that for the most part, the states of

money supply affect the choice to either invest or save. Debt intermediary theory was proposed

by Shaw (1973), by which expanded financial intermediation between the investors and savers

coming about due to financial development and liberalization, increases the average efficiency of

investment, encourages investments because of rise in supply of credit and raise the incentive to

invest and save. This view emphasizes the significance of free competition and entry within the

financial markets as necessities for successful financial intermediation. They labelled the major

fundamental principle of financial suppression as legal ceilings on bank lending and deposit rate,

high reserve requirements on deposits, limitation on entry into banking activities, limitation on

foreign currency capital transactions and directed credit.

Nonetheless, the Mckinnon-Shaw framework created the plan regarding financial sector reforms

in many developing nations. Nation experiences showed later that while the framework clarifies

18
a few of the quantitative changes in investment and savings at the total level, it shines over the

micro level interactions in the financial markets and among financial institutions which

influences the demand for credit and supply of savings by economic agents and the resulting

impact on economic growth. Mckinnon's suggestion depends on the complementarily theory,

which as opposed to the Neoclassical monetary growth theory, contended that there is a

complementarily among physical capital and money, which is recreated in money demand.

2.3.4 The Structuralist Framework

The structuralist school of thought give emphasis on structural difficulties, like, market

inefficiencies to be the most important justification for economic retrogression of developing

nations. They criticized the market clearing assumptions understood in the financial

liberalization school, particularly the assumption that higher interest rates draw in additional

savings into the formal financial sector (Van Wijinbergen, 1982).

In addition, Van Wijinbergen contended that it could simply be that informal markets will give

more financial intermediation. Because institutions in this sector are not expose to reserve

requirements and additional regulations that influence financial institutions in the formal sector.

He additionally contended that if informal sector agents substitute their deposits for that of the

formal sector because of high interest rates, the unforeseen outcome will have an unfavorable

impact on economic growth and financial intermediation (Dabwor, 2009).

2.4 EMPIRICAL REVIEW

Usman, Alimi and Onayemi (2018) examined the effect of bank intermediation activities on

economic growth in Nigeria. The study adopted secondary data obtained from the Central Bank

of Nigeria Statistical Bulletins from 1983 to 2014. OLS results revealed that loans and advances,

19
and money supply have a positive effects on economic growth. The Co-integration result showed

the existence of a long-run correlation between variables. The study established that financial

mediation by banks has a significant influence on economic growth in Nigeria.

John and Nwekemezie (2019) investigated the effect of financial intermediation on economic

development in Nigeria. The data is from 1986 to 2017. The data were obtained from the Central

Bank of Nigeria Statistical Bulletin, World Bank (World Development Indicators) and

International Monetary Fund (World Economic Outlook). The study focused on money supply,

credit to the private sector and lending rate to measure explanatory variables, while the

unemployment rate and real GDP were used to measure dependent variables. The autoregressive

distributed lag (ARDL) method was used to analyze the data. Findings indicated that credit to the

private sector did not really impact positively on economic development. This might be because

of the exorbitant lending rate. The exorbitant lending rate is unfavorable to the growth of the

economy. Therefore, the study suggested that the regulatory authority should formulate policies

that would force banks to reduce their lending rates to nurture the real sectors of the economy to

achieve better.

Onwe, Adeleye and Okorie (2019) investigated the financial intermediation and economic

growth relation in Nigeria using the autoregressive distributed lag (ARDL) approach from 1985

to 2016 and found a stable long-run relationship amongst the variables. The results also showed

that there was a statistically significant positive short-run and long-run relationship between

financial intermediation and economic growth. The study therefore recommended that monetary

and regulatory authorities should formulate policies aimed at improving financial intermediation

process by expending the scope of credits and deposits in financial institutions which in turn

promote financial responsiveness that can positively stimulate growth of the economy.

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Manasseh, Okoh, Abada, Ogbuabor, Alio, Lawal, Nwakoby, & Asogwa (2021) investigated the

impact of financial intermediation on economic growth in Nigeria. Data were sourced from the

Nigerian Bureau of Statistics and World Bank Development indicator from 1994: Q1 to 2018:

Q4 was used for analysis, and the Ordinary Least Squares (OLS) technique was adopted for the

evaluation of the hypotheses. Per-capita GDP was utilized in measuring economic growth, while

bank credit, bank liquidity reserves and bank deposits are to measure financial intermediation.

Further examination revealed that deposit is positively and significantly connected to Per-capita

GDP, implying that a rise in bank deposits gives about 0.244193 rises in economic growth. The

research work further noted that bank credit affected economic growth positively. Though, the

effect was discovered to be inconsequential. The study also observed bank liquidity reserve

asserts substantial and positive effects on economic growth. Subsequently, the study

recommended good policy reforms that might stimulate the efficiency and growth of banks

which serve as a crucial factor for economic expansion in Nigeria.

Nnabugwu (2021) examined effect of financial intermediation on the development of small and

medium scale enterprises in Anambra State Nigeria. The study specifically was designed to scale

enterprises in Anambra state, Nigeria. Relevant conceptual, theoretical and empirical literature

were reviewed. The study was anchored on supply leading theory. Descriptive survey research

design was adopted. The study was carried out in Anambra State, Nigeria. Population of study is

infinite. The sample size is 384 using Cochran determining the sample size for an unknown

population. The study make use of primary source of data. Face and content validity was

employed to establish the validity of the research instrument. The instrument was pilot tested

with representative sample of 30 owners of SMES in Onitsha, Awka and Nnewi in Anambra

State. Cronbach Alpha value of 0.812 was obtained which is within the acceptable threshold. The

21
data that will be generated through the questionnaire was analyzed using multiple regression.

The hypotheses was tested at 0.05 level of significance. The study found that Bank loan and

advances had a significant effect on the development of small and medium scale enterprises.

Bank lending rate had a significant effect on the development of small and medium scale

enterprises. Collateral security had a significant effect on the development of small and medium

scale enterprises and Bank credit availability had a significant effect on the development of small

and medium scale enterprises in Anambra state, Nigeria. The study concluded that financial

intermediation had significant effect on the development of small and medium scale enterprises

in Anambra state. The study recommended that Government should put in place measures to

enhance the availability of finance to SMEs, particularly in the area of institutional credit that

would provide affordable medium and long-term loans for expansion and working capital needs.

Government should establish credit guarantee and insurance schemes to address the problem of

SMEs providing collaterals to banks before loans are administered to the sub-sector. CBN, the

apex bank of the country in recognition of the importance and contribution of SMEs to the

nation’s economic/industrial development should encourage commercial banks and other

financial institutions to lend to the SME sub-sector with ease. Various credit schemes targeted at

SMEs in Nigeria should be re-energized, coordinated and monitored so that they can effectively

impact on the growth and development of the economy.

Orenuga and Oyedokun (2022) examined the influence of financial intermediation on the

economic growth in Nigeria, by using eight selected financial intermediaries in the category of

international authorization in Nigeria. The study adopted an ex-post facto research design since

data were collected from secondary sources through the World Bank Development indicator and

the National Bureau of Statistics for the periods 2011 to 2020. Financial intermediation was

22
measured by using bank deposits, loans, and bank liquidity reserves, whereas Nigerian economic

growth was measured by Nigerian GDP. The study applied OLS in its analysis to ascertain the

influence of financial intermediation on Nigeria economic growth. The outcome of the report

demonstrated that credit and government expenditure have enhanced Nigeria economic growth,

while customers’ deposits and liquidity reserve did not enhance Nigeria economic growth. The

research paper recommended that financial intermediaries should improve their support for

micro, small and medium enterprises (MSME) and real sectors of the economy to enhance

Nigeria economic growth. Regulatory authorities should formulate policies to encourage

financial intermediaries to lower their lending rates to nurture the productive sector of the

economy to do better. Nigeria government to provide basic infrastructures such as adequate

electricity supplies, provision of enough security personnel, good road networks to help banks to

minimize amounts spent on providing an alternative source of power and securities for their

branches. The government needs to improve spending on capital expenditure rather than

spending on recurrent expenditure to stimulate economic growth. Government should provide an

enabling environment for its citizenry to embark on businesses that will stimulate economic

growth.

23
 CHAPTER THREE

RESEARCH METHOD

3.1 INTRODUCTION

This chapter outlines the method adopted in the conduct of the study. It specifies information on

the research methods to be used for the study, and they include research design, population of the

study, sources and methods of data collection, estimation techniques, model specification and

definition of variables.

3.2 RESEARCH DESIGN

This study adopts an ex-facto research design as it is characterized by analysis of historical

financial data. Also, it employed various descriptive and inferential statistics in examination of

the effect of financial intermediation on economic growth using a comparative study of Nigeria

and South Africa. The descriptive statistics gives stylized fact on the features of the main

variables in the model while the inferential statistics facilitates the establishment of the extent of

agreement or divergence in examining the effect of financial intermediation on economic growth

using a comparative study of Nigeria and South Africa.

3.3 POPULATION OF THE STUDY

The population of study comprised of gross domestic product, banks’ total deposit, banks’ total

savings and banks’ credit to private sector in Nigeria and South Africa.

3.4 SOURCES AND METHODS OF DATA COLLECTION

The sources used in collecting data in any study or investigation depends on the type of data

needed and the purpose of the investigation. However, in achieving the set objectives of this

24
study, this study will employ the use of secondary data collection. It relied heavily on time series

data from the Central Bank of Nigeria (CBN) Statistical Bulletin and South African Reserve

Bank (SARB) Quarterly Bulletin. The data collected are on annually basis from 1990-2021.

3.5 ESTIMATION TECHNIQUES

The Autoregressive Distributed Lag (ARDL) model would be used to analyze the short run

relationship between the dependent variable and the independent variables using E-Views 11.0

Output Statistical Software.

3.6 MODEL SPECIFICATION

In order to verify and test the relationship between the independent variables (Banks’ Total

Deposit, Banks’ Total Savings and Banks’ Credit to Private Sector) and the dependent variable

(Gross Domestic Product) the following is built to be used:

GDP = f (TOD, TOS, CPS)

Where;

GDP = Gross Domestic Product.

TOD = Banks’ Total Deposit.

TOS = Banks’ Total Savings.

CPS = Banks’ Credit to Private Sector.

The model can be represented in economic form as:

ΔGDPt = β0 + ΣβiΔTODyt-i + ΣγjΔTOS1t-j + ΣδkΔCPSt-k + θ0yt-1 + θ1x1t-1 + θ2x2t-1 + et

3.7 DEFINITION OF VARIABLES

25
Gross Domestic Product: This is a monetary measure of the market value of all final goods and

services produced in a particular time span by nations.

Banks' Total Deposit: This is the aggregate sum of money set into a deposit account at a

banking institution, like, money market accounts, checking accounts and savings accounts.

Banks' Total Savings: This is the aggregate sum of the periodic contributions to be made under

a savings contract.

Banks' Credit to Private Sector: This refers to financial resources given by banks to the private

sector, like, trade credits, purchases of non-equity securities, loans and advances and other

accounts receivable, which lay out a claim for repayment.

26
 CHAPTER FOUR

DATA PRESENTATION, ANALYSIS AND PRESENTATION OF

RESULTS

4.1 INTRODUCTION

This chapter covers the presentation, analysis, and presentation of data important to examine the

effect of financial intermediation on economic growth using a comparative study of Nigeria and

South Africa across the time period (1990-2021) under consideration. To the model developed in

the previous chapter (chapter 3), data from the Central Bank of Nigeria (CBN) Statistical

Bulletin and South African Reserve Bank (SARB) Quarterly Bulletin for the year 1990 to 2021

were fitted using the Auto-Regressive Distributed Lag Models (ARDL) method and E-views

computer software. This chapter covers stationarity using Augumented Dickey-Fuller (ADF) unit

root test, co-integration (long run relationship) using Johansen co-integration test, short run

relationship (ECM) was used to check for equilibrium and disequilibrium in the model and result

discussion in that order.

4.2 EMPIRICAL RESULTS

4.2.1 Stationarity Test

In order to find out whether the variables in the model are stationary, Augumented Dickey-Fuller

(ADF), unit root test was conducted. If the absolute value of Augumented Dickey-Fuller test

statistic is greater than the absolute critical value at the prescribed level of significance (5%), the

variables are stationary, otherwise they are not stationary.

Table 4.1: Unit Root Test results using ADF procedure for Nigeria

27
 Variables Level 1st Difference Order of Integration
GDP -0.404754 -3.729116 I(1)
TOD 2.243726 I(0)
TOS 8.231329 I(0)
CPS 4.414626 I(0)
5% Level 5% Level
GDP -2.960411 -2.963972
TOD -2.963972
TOS -2.960411
CPS -2.960411
Source: Author’s E-Views Computation, 2022

Table 4.2: Unit Root Test results using ADF procedure for South Africa

Variables Level 1st Difference Order of Integration

GDP -0.804144 -4.422616 I(1)
TOD 4.197539 I(0)
TOS 3.064641 I(0)
CPS 0.828801 I(0)
5% Level 5% Level
GDP -2.960411 -2.967767
TOD -2.991878
TOS -2.967767
CPS -2.963972
Source: Author’s E-Views Computation, 2022

From the ADF unit root result in Table 4.1 i.e. for Nigeria, TOD, TOS and CPS were stationary

at level. At first difference, all variables were stationary.

28
From the ADF unit root result in Table 4.2 i.e. for South Africa, TOD, TOS and CPS were

stationary at level. At first difference, all variables were stationary.

We therefore conclude that all the series used for the regression in Table 4.1 and Table 4.2 were

stationary at the level indicated.

4.2.2 Long Run Relationship Test

Co-integration test was carried out to examine the long run relationship among the variables

using Johansen co-integration test. Reject the null hypothesis in absolute terms, if trace statistic

of the variable is greater than the critical value but do not reject the null hypothesis, if trace

statistic of the variable is less than the critical value.

Table 4.3: Johansen Co-Integration Test for Nigeria

Hypothesized Eigenvalue Trace Statistic 0.05 Critical Prob.**

No. of CE(s) Value
None* 0.820531 103.8786 47.85613 0.0000
At most 1* 0.601186 52.34606 29.79707 0.0000
At most 2* 0.439925 24.76827 15.49471 0.0015
At most 3* 0.218018 7.377708 3.841466 0.0066
Source: Author’s E-Views Computation, 2022

Table 4.4: Johansen Co-Integration Test for South Africa

Hypothesized No. Eigenvalue Trace Statistic 0.05 Critical Prob.**

of CE(s) Value
None* 0.595185 63.03323 47.85613 0.0010
At most 1* 0.529754 35.90350 29.79707 0.0087
At most 2 0.273775 13.26852 15.49471 0.1053
At most 3 0.115195 3.671649 3.841466 0.0553

29
 Source: Author’s E-Views Computation, 2022

In conclusion, since 4 co-integration equation at the 0.05 level in Table 4.3 and 2 co-integration

equation at the 0.05 level in Table 4.4 are greater than the critical values at 5%, we say they are

co-integrated.

4.2.3 Short Run Relationship Test

The Error Correction Mechanism was used to check for equilibrium and disequilibrium in the

model. If the coefficient of the ECM(-1) is negative, there is convergence, and if the probability

of the ECM(-1) is less than 0.05, the chosen level of significance, there is equilibrium. If

otherwise, then there is disequilibrium.

Table 4.5: Error Correction Mechanism for Nigeria

Variable Coefficient Std. Error t-Statistic Prob.

ECM(-1) -1.085974 0.168800 -6.433483 0.0000
C 0.568009 0.961600 0.590692 0.5600
Source: Author’s E-Views Computation, 2022

Table 4.6: Error Correction Mechanism for South Africa

Variable Coefficient Std. Error t-Statistic Prob.

ECM(-1) -1.577414 0.164092 -9.612966 0.0000
C 0.023805 2.416056 0.009853 0.9922
Source: Author’s E-Views Computation, 2022

From the result shown in Table 4.5 and Table 4.6 above, since the coefficient of the ECM(-1)

which are -1.085974 and -1.577414 are negative, and the probability are 0.0000 and 0.0000

30
which are less than 0.05 level of significance, we conclude that there is convergence and

equilibrium.

4.3 REGRESSION RESULTS

This section explicitly presents the two major regression results or outputs of the Auto-

Regressive Distributed Lag Models (ARDL) which are: The Long run estimates and The Short

run results. On the basis of these results follows the findings.

Table 4.7: Long Run Regression Estimates for Nigeria

Variables Coefficient Std. Error t-Statistic Prob.

TOD -0.003020 0.015425 -0.195789 0.8483
TOS -0.096064 0.017535 -5.478500 0.0002
CPS 0.079140 0.012560 6.301069 0.0001
C 32.79689 3.938314 8.327649 0.0000
Source: Author’s E-Views Computation, 2022

Table 4.8: Long Run Regression Estimates for South Africa

Variables Coefficient Std. Error t-Statistic Prob.

TOD -0.000980 0.000175 -5.609166 0.0001
TOS 8.490005 0.000807 0.105183 0.9180
CPS 0.000298 3.590005 8.300108 0.0000
C 110.0899 8.156027 13.49798 0.0000
Source: Author’s E-Views Computation, 2022

From the coefficients of the variables in Table 4.7, TOD and TOS have negative effect on GDP,

while CPS was shown to have positive effect on GDP. From the coefficients of the variables in

31
Table 4.8, TOD have negative effect on GDP, while TOS and CPS were shown to have positive

effect on GDP.

The long run estimates are relied on and used for further analysis.

Table 4.9: Short Run result for Nigeria

Variables Coefficient Std. Error t-Statistic Prob.

D(GDP(-1)) 0.317620 0.165304 1.921424 0.0810
D(GDP(-2)) 0.889457 0.173695 5.120799 0.0003
D(GDP(-3)) 0.237414 0.114469 2.074053 0.0623
D(TOD) 0.012345 0.005149 2.397554 0.0354
D(TOD(-1)) 0.014091 0.005821 2.420897 0.0340
D(TOD(-2)) 0.063074 0.010527 5.991712 0.0001
D(TOD(-3)) 0.049385 0.019951 2.475271 0.0308
D(TOD(-4)) -0.110575 0.017551 -6.300358 0.0001
D(TOS) 0.013444 0.007612 1.766119 0.1051
D(TOS(-1)) 0.012673 0.007103 1.784188 0.1020
D(TOS(-2)) -0.041455 0.007832 -5.293343 0.0003
D(TOS(-3)) 0.029774 0.016075 1.852234 0.0910
D(TOS(-4)) 0.049566 0.009907 5.003096 0.0004
D(CPS) -0.014516 0.006714 -2.162189 0.0535
D(CPS(-1)) -0.045707 0.005162 -8.854735 0.0000
C 4.293206 4.162213 1.031472 0.3245
Source: Author’s E-Views Computation, 2022

Table 4.10: Short Run result for South Africa

Variables Coefficient Std. Error t-Statistic Prob.

D(GDP(-1)) 0.569490 0.257195 2.214234 0.0408

32
 D(TOD) -0.000221 0.000214 -1.033032 0.3161
D(TOD(-1)) 0.000540 0.000209 2.583530 0.0193
D(TOD(-2)) 6.200005 0.000280 0.221653 0.8272
D(TOD(-3)) -0.000462 0.000248 -1.861872 0.0800
D(TOS) 0.000126 0.000576 0.218789 0.8294
D(CPS) -4.580005 9.270005 -0.494035 0.6276
D(CPS(-1)) -0.000274 0.000122 -2.242858 0.0385
D(CPS(-2)) 0.000148 0.000136 1.087136 0.2922
D(CPS(-3)) 0.000147 0.000103 1.428748 0.1712
C 10.60761 11.15131 0.951243 0.3548
Source: Author’s E-Views Computation, 2022

4.4 ANSWERING OF RESEARCH QUESTIONS

The long run regression result presented in Table 4.7 and Table 4.8 above is used to answer the

research questions.

Research Question 1

What effect does Banks’ Total Deposit have on Gross Domestic Product in Nigeria and South

Africa?

In Nigeria

From the regression result in Table 4.7, banks’ total deposit has a negative effect on gross

domestic product. This is shown by the negative coefficient of TOD i.e. -0.003020.

In South Africa

From the regression result in Table 4.8, banks’ total deposit has a negative effect on gross

domestic product. This is shown by the negative coefficient of TOD i.e. -0.000980.

33
Research Question 2

What effect does Banks’ Total Savings have on Gross Domestic Product in Nigeria and South

Africa?

In Nigeria

From the regression result in Table 4.7, banks’ total savings has a negative effect on gross

domestic product. This is shown by the negative coefficient of TOS i.e. -0.096064.

In South Africa

From the regression result in Table 4.8, banks’ total savings has a positive effect on gross

domestic product. This is shown by the positive coefficient of TOS i.e. 8.490005.

Research Question 3

What effect does Banks’ Credit to Private Sectors have on Gross Domestic Product in Nigeria

and South Africa?

In Nigeria

From the regression result in Table 4.7, banks’ credit to private sectors has a positive effect on

gross domestic product. This is shown by the positive coefficient of CPS i.e. 0.079140.

In South Africa

From the regression result in Table 4.8, banks’ credit to private sectors has a positive effect on

gross domestic product. This is shown by the positive coefficient of CPS i.e. 0.000298.

4.5 TEST OF HYPOTHESES

34
In light of the preceding study of the data used to examine the effect of financial intermediation

on economic growth using a comparative study of Nigeria and South Africa, it's vital to compare

and contrast the initial hypotheses stated and the subsequent outcomes. The hypothesis was

tested for the significance of the independent variables using the student’s t-test at 0.05 level of

significance.

Decision Rule: Reject the null hypothesis if the t-calculated is greater than t-tabulated; if

otherwise, do not reject the null hypothesis.

The tabulated t values were obtained from the student’s t-distribution and 29 degrees of freedom.

Where; n = number of observations, and k = number of parameter estimates. Then, (df) degree of

freedom = n – k i.e. 32 – 3 = 29. From the t-table, t tabulated at 5% level of significance = 2.045.

The hypothesis is thus stated as:

Hypothesis 1

H0: Banks’ Total Deposit has no significant effect on Gross Domestic Product in Nigeria and

South Africa.

In Nigeria

The t-calculated of the estimated coefficient of the variable (TOD) in Table 4.7 above i.e. -

0.195789, was compared with the t-tabulated value of 2.045 to test the hypothesis. Following the

rule above, since t-tabulated is greater than t-calculated, we do not reject the null hypothesis and

conclude that banks’ total deposit has no significant effect on gross domestic product in Nigeria.

In South Africa

35
The t-calculated of the estimated coefficient of the variable (TOD) in Table 4.7 above i.e. -

5.609166, was compared with the t-tabulated value of 2.045 to test the hypothesis. Following the

rule above, since t-tabulated is greater than t-calculated, we do not reject the null hypothesis and

conclude that banks’ total deposit has no significant effect on gross domestic product in South

Africa.

Hypothesis 2

H0: Banks’ Total Savings has no significant effect on Gross Domestic Product in Nigeria and

South Africa.

In Nigeria

The t-calculated of the estimated coefficient of the variable (TOS) in Table 4.7 above i.e. -

5.478500, was compared with the t-tabulated value of 2.045 to test the hypothesis. Following the

rule above, since t-tabulated is greater than t-calculated, we do not reject the null hypothesis and

conclude that banks’ total savings has no significant effect on gross domestic product in Nigeria.

In South Africa

The t-calculated of the estimated coefficient of the variable (TOS) in Table 4.7 above i.e.

0.105183, was compared with the t-tabulated value of 2.045 to test the hypothesis. Following the

rule above, since t-tabulated is greater than t-calculated, we do not reject the null hypothesis and

conclude that banks’ total savings has no significant effect on gross domestic product in South

Africa.

Hypothesis 3

36
H0: Banks’ Credit to Private Sector has no significant effect on Gross Domestic Product in

Nigeria and South Africa.

In Nigeria

The t-calculated of the estimated coefficient of the variable (CPS) in Table 4.7 above i.e.

6.301069, was compared with the t-tabulated value of 2.045 to test the hypothesis. Following the

rule above, since t-tabulated is lesser than t-calculated, we reject the null hypothesis and

conclude that banks’ credit to private sector has a significant effect on gross domestic product in

Nigeria.

In South Africa

The t-calculated of the estimated coefficient of the variable (TOS) in Table 4.7 above i.e.

8.300108, was compared with the t-tabulated value of 2.045 to test the hypothesis. Following the

rule above, since t-tabulated is lesser than t-calculated, we reject the null hypothesis and

conclude that banks’ credit to private sector has a significant effect on gross domestic product in

South Africa.

4.6 DISCUSSION OF FINDINGS

Findings 1: Banks’ total deposit has no significant effect on gross domestic product in Nigeria

and South Africa. As hypothesized, this implies that banks’ total deposit has no real effect on

gross domestic product in Nigeria and South Africa.

Finding 2: Banks’ total savings has no significant effect on gross domestic product in Nigeria

and South Africa. As hypothesized, this implies that banks’ total savings has no real effect on

gross domestic product in Nigeria and South Africa.

37
Finding 3: Banks’ credit to private sector has a significant effect on gross domestic product in

Nigeria and South Africa. As hypothesized, this implies that banks’ credit to private sector has a

real effect on gross domestic product in Nigeria and South Africa.

38
 CHAPTER FIVE

SUMMARY, CONCLUSION AND RECOMMENDATION

5.1 INTRODUCTION

The study's last chapter contains a summary of all findings derived and analyzed by the

researcher, as well as a conclusion based on these findings and recommendations to economic

planners, monetary expertise, regulatory authorities, government and financial intermediaries on

the true nature of financial intermediation effect on gross domestic product in Nigeria and South

Africa. The chapter concluded with recommendations for future research on the subject of

discourse.

5.2 SUMMARY

This section contains a summary of the study's principal conclusions, which are based on

empirical investigation of the effect of financial intermediation on economic growth using a

comparative study of Nigeria and South Africa. As a result, it is more convenient to summarize

these findings as follows:

i. Banks’ total deposit has no significant effect on gross domestic product in Nigeria and

South Africa.

ii. Banks’ total savings has no significant effect on gross domestic product in Nigeria and

South Africa.

iii. Banks’ credit to private sector has a significant effect on gross domestic product in

Nigeria and South Africa.

5.3 CONCLUSION

39
The study concentrated on the effect of financial intermediation on economic growth using a

comparative study of Nigeria and South Africa. Data were obtained from the Central Bank of

Nigeria (CBN) Statistical Bulletin and South African Reserve Bank (SARB) Quarterly Bulletin

covering the period from 1990–2021. This data were fitted into a linear single equation model in

which gross domestic product (GDP) represented the dependent variable, while bank’s total

deposit (TOD), banks’ total savings (TOS) and banks’ credit to private sectors (CPS) represented

the independent variables in the model.

Auto-Regressive Distributed Lag Models (ARDL) method was used to estimate the parameters

aided by E-views computer software. The specific objectives of the study were to determine the

effect bank’s total deposit, banks’ total savings and banks’ credit to private sectors on gross

domestic product in Nigeria and South Africa. The result showed that bank’s total deposit and

banks’ total savings have no significant effect on gross domestic product in Nigeria and South

Africa. While, banks’ credit to private sectors has a significant effect on gross domestic product

in Nigeria and South Africa.

5.4 RECOMMENDATION

The following recommendations for economic planners, monetary expertise, regulatory

authorities, government, financial intermediaries, and future studies should be made based on the

major conclusions that emerged from this study:

i. Economic planners, monetary expertise and regulatory authorities specifically ought to

combine efforts and formulate policies targeted at enhancing financial intermediation

process by expending the scope of deposit and credits in financial institutions. This will,

in succession, incite financial responsiveness that can affect the growth of the economy.

40
 ii. Government ought to guarantee the existence of a lively and an efficient financial system

that incite financial intermediation in the economy.

iii. Regulatory authorities should formulate policies that would motivate financial

intermediaries to decrease their lending rates to help the productive sector of the

economy to improve.

iv. Financial intermediaries ought to be more effective in mobilizing and distributing funds

to entrepreneurs.

v. Financial intermediaries ought to be more efficient in credit allocation to increase

economic growth.

vi. Regulatory authorities ought to properly regulate and control activities of financial

intermediaries, in other to accomplish a sound financial systems.

vii. Policy on financial development ought to be emphasizing, so as to drive and stir up

economic growth in Nigeria.

5.5 SUGGESTION FOR FURTHER STUDIES

It is recommended in this study that more research on this topic be conducted on Sub-Saharan

African countries, so as to promote the boundaries of knowledge further, because the economy of

the majority of these countries are at similar stages of development. African developing countries

seem to deal with many of the same challenges; therefore, such an analysis might be conducted

as part of a panel data study.

41
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Robinson, J. (1952). The generalization of the general theory, in the rate of interest and other

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46
 APPENDIX

Statistical Data

Nigeria Data

YEAR GDP TOD TOS CPS

1990 54.04 24.21 29.65 33.55
1991 49.12 26.95 37.74 41.35
1992 47.79 39.21 55.12 58.12
1993 27.75 60.91 85.03 127.12
1994 33.83 78.79 110.97 143.42
1995 44.06 94.57 108.49 180.00
1996 51.08 111.34 134.50 238.60
1997 54.46 137.95 177.65 316.21
1998 54.60 161.86 200.07 351.96
1999 59.37 206.62 277.67 431.17
2000 69.45 363.72 385.19 530.37
2001 74.03 478.04 488.05 764.96
2002 95.39 559.31 592.09 930.49
2003 104.91 813.40 655.74 1096.54
2004 136.39 872.07 797.52 1421.66
2005 176.13 1162.16 1316.96 1838.39
2006 236.10 1629.71 1739.64 2290.62
2007 275.63 2455.98 2686.84 3668.66
2008 339.48 4174.38 4247.83 7899.14
2009 295.01 4283.44 5707.99 9889.58
2010 361.46 4639.16 5941.37 10518.17
2011 404.99 5407.18 6526.69 9600.02
2012 455.50 6068.48 8021.19 13293.64
2013 508.69 6256.30 9603.45 14461.41
2014 546.68 5834.68 11451.59 16753.00
2015 486.80 6377.17 11763.92 18688.42
2016 404.65 7316.09 14034.23 21025.24
2017 375.75 7697.36 14464.64 22459.18
2018 397.19 8494.64 16053.43 22646.33
2019 448.12 8625.77 18229.53 25676.87
2020 432.29 11537.19 21990.48 29030.01
2021 440.78 15230.88 25648.26 32868.49
Source: Macrotrends and CBN Statistical Bulletin

South Africa Data

47
 YEAR GDP TOD TOS CPS
1990 126.05 23999 18044 168341
1991 135.20 26723 19601 192672
1992 146.96 31845 20852 209487
1993 147.20 30066 21689 229804
1994 153.51 36728 23103 268926
1995 171.74 45242 24190 316709
1996 163.24 65310 24678 367213
1997 168.98 71918 25892 420091
1998 152.98 99109 29210 490109
1999 151.52 113136 32198 532723
2000 151.75 119340 32313 590089
2001 135.43 137886 35433 673615
2002 129.09 159647 37504 703549
2003 197.02 168833 45422 838500
2004 255.81 177036 51234 954224
2005 288.87 211101 57861 1140195
2006 303.86 267687 72692 1434873
2007 333.08 337672 90026 1743858
2008 316.13 333774 112778 1981050
2009 329.75 384840 121445 1979517
2010 417.37 390260 128409 2087865
2011 458.20 434806 142688 2216668
2012 434.40 458109 153453 2439476
2013 400.89 495702 169562 2589003
2014 381.20 557477 198480 2808739
2015 346.71 670265 218024 3094379
2016 323.59 796516 231347 3252270
2017 381.45 838451 245937 3470553
2018 404.84 888922 262384 3649269
2019 387.93 920164 288566 3870083
2020 335.44 1100651 340756 4007690
2021 419.95 1165583 406864 4102331
Source: Macrotrends and SARB Full Quarterly Bulletin (Money and Banking)

GDP at Level for Nigeria

Null Hypothesis: GDP has a unit root

Exogenous: Constant
Lag Length: 0 (Automatic - based on SIC, maxlag=7)

t-Statistic Prob.*

48
Augmented Dickey-Fuller test statistic -0.404754 0.8964
Test critical values: 1% level -3.661661
5% level -2.960411
10% level -2.619160

*MacKinnon (1996) one-sided p-values.

Augmented Dickey-Fuller Test Equation

Dependent Variable: D(GDP)
Method: Least Squares
Date: 12/17/22 Time: 14:19
Sample (adjusted): 1991 2021
Included observations: 31 after adjustments

Variable CoefficientStd. Error t-Statistic Prob.

GDP(-1) -0.014918 0.036856 -0.404754 0.6886

C 15.89246 10.64226 1.493335 0.1462

R-squared 0.005617 Mean dependent var 12.47548

Adjusted R-squared -0.028672 S.D. dependent var 35.57192
S.E. of regression 36.07827 Akaike info criterion 10.07160
Sum squared resid 37747.60 Schwarz criterion 10.16411
Log likelihood -154.1098 Hannan-Quinn criter. 10.10176
F-statistic 0.163826 Durbin-Watson stat 1.299306
Prob(F-statistic) 0.688629

GDP at First Difference for Nigeria

49
Null Hypothesis: D(GDP) has a unit root
Exogenous: Constant
Lag Length: 0 (Automatic - based on SIC, maxlag=7)

t-Statistic Prob.*

Augmented Dickey-Fuller test statistic -3.729116 0.0087

Test critical values: 1% level -3.670170
5% level -2.963972
10% level -2.621007

*MacKinnon (1996) one-sided p-values.

Augmented Dickey-Fuller Test Equation

Dependent Variable: D(GDP,2)
Method: Least Squares
Date: 12/17/22 Time: 14:21
Sample (adjusted): 1992 2021
Included observations: 30 after adjustments

Variable CoefficientStd. Error t-Statistic Prob.

D(GDP(-1)) -0.659758 0.176921 -3.729116 0.0009

C 8.765452 6.675766 1.313026 0.1998

R-squared 0.331843 Mean dependent var 0.447000

Adjusted R-squared 0.307980 S.D. dependent var 41.42797
S.E. of regression 34.46299 Akaike info criterion 9.981990
Sum squared resid 33255.54 Schwarz criterion 10.07540
Log likelihood -147.7298 Hannan-Quinn criter. 10.01187
F-statistic 13.90630 Durbin-Watson stat 1.992801

50
Prob(F-statistic) 0.000864

TOD at Level for Nigeria

Null Hypothesis: TOD has a unit root

Exogenous: Constant
Lag Length: 1 (Automatic - based on SIC, maxlag=7)

t-Statistic Prob.*

Augmented Dickey-Fuller test statistic 2.243726 0.9999

Test critical values: 1% level -3.670170
5% level -2.963972
10% level -2.621007

*MacKinnon (1996) one-sided p-values.

Augmented Dickey-Fuller Test Equation

Dependent Variable: D(TOD)
Method: Least Squares
Date: 12/17/22 Time: 14:22
Sample (adjusted): 1992 2021
Included observations: 30 after adjustments

Variable CoefficientStd. Error t-Statistic Prob.

TOD(-1) 0.102296 0.045592 2.243726 0.0333

D(TOD(-1)) 0.486572 0.246412 1.974631 0.0586
C -7.158541 167.5719 -0.042719 0.9662

R-squared 0.456838 Mean dependent var 506.7977

51
Adjusted R-squared 0.416604 S.D. dependent var 867.4698
S.E. of regression 662.5765 Akaike info criterion 15.92479
Sum squared resid 11853205 Schwarz criterion 16.06491
Log likelihood -235.8718 Hannan-Quinn criter. 15.96961
F-statistic 11.35448 Durbin-Watson stat 1.800687
Prob(F-statistic) 0.000264

TOS at Level for Nigeria

Null Hypothesis: TOS has a unit root

Exogenous: Constant
Lag Length: 0 (Automatic - based on SIC, maxlag=7)

t-Statistic Prob.*

Augmented Dickey-Fuller test statistic 8.231329 1.0000

Test critical values: 1% level -3.661661
5% level -2.960411
10% level -2.619160

*MacKinnon (1996) one-sided p-values.

Augmented Dickey-Fuller Test Equation

Dependent Variable: D(TOS)
Method: Least Squares
Date: 12/17/22 Time: 14:25
Sample (adjusted): 1991 2021
Included observations: 31 after adjustments

52
Variable CoefficientStd. Error t-Statistic Prob.

TOS(-1) 0.137493 0.016704 8.231329 0.0000

C 126.0122 135.7803 0.928059 0.3610

R-squared 0.700273 Mean dependent var 826.4068

Adjusted R-squared 0.689938 S.D. dependent var 1058.014
S.E. of regression 589.1362 Akaike info criterion 15.65753
Sum squared resid 10065362 Schwarz criterion 15.75005
Log likelihood -240.6918 Hannan-Quinn criter. 15.68769
F-statistic 67.75478 Durbin-Watson stat 1.832961
Prob(F-statistic) 0.000000

CPS at Level for Nigeria

Null Hypothesis: CPS has a unit root

Exogenous: Constant
Lag Length: 0 (Automatic - based on SIC, maxlag=7)

t-Statistic Prob.*

Augmented Dickey-Fuller test statistic 4.414626 1.0000

Test critical values: 1% level -3.661661
5% level -2.960411
10% level -2.619160

*MacKinnon (1996) one-sided p-values.

Augmented Dickey-Fuller Test Equation

Dependent Variable: D(CPS)

53
Method: Least Squares
Date: 12/17/22 Time: 14:26
Sample (adjusted): 1991 2021
Included observations: 31 after adjustments

Variable CoefficientStd. Error t-Statistic Prob.

CPS(-1) 0.094974 0.021513 4.414626 0.0001

C 334.9257 255.3626 1.311569 0.2000

R-squared 0.401925 Mean dependent var 1059.192

Adjusted R-squared 0.381302 S.D. dependent var 1385.186
S.E. of regression 1089.551 Akaike info criterion 16.88726
Sum squared resid 34426508 Schwarz criterion 16.97977
Log likelihood -259.7525 Hannan-Quinn criter. 16.91742
F-statistic 19.48892 Durbin-Watson stat 1.834644
Prob(F-statistic) 0.000129

GDP at Level for South Africa

Null Hypothesis: GDP has a unit root

Exogenous: Constant
Lag Length: 0 (Automatic - based on SIC, maxlag=7)

t-Statistic Prob.*

Augmented Dickey-Fuller test statistic -0.804144 0.8039

Test critical values: 1% level -3.661661
5% level -2.960411
10% level -2.619160

54
*MacKinnon (1996) one-sided p-values.

Augmented Dickey-Fuller Test Equation

Dependent Variable: D(GDP)
Method: Least Squares
Date: 12/17/22 Time: 14:31
Sample (adjusted): 1991 2021
Included observations: 31 after adjustments

Variable CoefficientStd. Error t-Statistic Prob.

GDP(-1) -0.045665 0.056787 -0.804144 0.4279

C 21.60429 16.33780 1.322350 0.1964

R-squared 0.021812 Mean dependent var 9.480645

Adjusted R-squared -0.011919 S.D. dependent var 34.84072
S.E. of regression 35.04774 Akaike info criterion 10.01364
Sum squared resid 35621.97 Schwarz criterion 10.10616
Log likelihood -153.2114 Hannan-Quinn criter. 10.04380
F-statistic 0.646648 Durbin-Watson stat 1.458525
Prob(F-statistic) 0.427857

GDP at First Difference for South Africa

Null Hypothesis: D(GDP) has a unit root

Exogenous: Constant
Lag Length: 1 (Automatic - based on SIC, maxlag=7)

t-Statistic Prob.*

55
Augmented Dickey-Fuller test statistic -4.422616 0.0016
Test critical values: 1% level -3.679322
5% level -2.967767
10% level -2.622989

*MacKinnon (1996) one-sided p-values.

Augmented Dickey-Fuller Test Equation

Dependent Variable: D(GDP,2)
Method: Least Squares
Date: 12/17/22 Time: 14:33
Sample (adjusted): 1993 2021
Included observations: 29 after adjustments

Variable CoefficientStd. Error t-Statistic Prob.

D(GDP(-1)) -1.071202 0.242210 -4.422616 0.0002

D(GDP(-1),2) 0.451625 0.226022 1.998149 0.0563
C 10.86502 6.649284 1.634014 0.1143

R-squared 0.436583 Mean dependent var 2.508621

Adjusted R-squared 0.393243 S.D. dependent var 43.85224
S.E. of regression 34.15853 Akaike info criterion 9.997599
Sum squared resid 30336.93 Schwarz criterion 10.13904
Log likelihood -141.9652 Hannan-Quinn criter. 10.04190
F-statistic 10.07349 Durbin-Watson stat 1.686337
Prob(F-statistic) 0.000576

TOD at Level for South Africa

56
Null Hypothesis: TOD has a unit root
Exogenous: Constant
Lag Length: 7 (Automatic - based on SIC, maxlag=7)

t-Statistic Prob.*

Augmented Dickey-Fuller test statistic 4.197539 1.0000

Test critical values: 1% level -3.737853
5% level -2.991878
10% level -2.635542

*MacKinnon (1996) one-sided p-values.

Augmented Dickey-Fuller Test Equation

Dependent Variable: D(TOD)
Method: Least Squares
Date: 12/17/22 Time: 14:33
Sample (adjusted): 1998 2021
Included observations: 24 after adjustments

Variable CoefficientStd. Error t-Statistic Prob.

TOD(-1) 0.519437 0.123748 4.197539 0.0008

D(TOD(-1)) -0.934745 0.333847 -2.799918 0.0135
D(TOD(-2)) -0.657168 0.310559 -2.116083 0.0515
D(TOD(-3)) -1.584953 0.298208 -5.314929 0.0001
D(TOD(-4)) -0.701928 0.420535 -1.669129 0.1158
D(TOD(-5)) -0.361028 0.314724 -1.147124 0.2693
D(TOD(-6)) -1.268469 0.338913 -3.742759 0.0020
D(TOD(-7)) -0.768271 0.423089 -1.815859 0.0894
C 33047.97 10925.95 3.024723 0.0085

57
R-squared 0.779812 Mean dependent var 45569.38
Adjusted R-squared 0.662379 S.D. dependent var 42991.20
S.E. of regression 24980.11 Akaike info criterion 23.36954
Sum squared resid 9.36E+09 Schwarz criterion 23.81131
Log likelihood -271.4345 Hannan-Quinn criter. 23.48675
F-statistic 6.640467 Durbin-Watson stat 2.470835
Prob(F-statistic) 0.000872

TOS at Level for South Africa

Null Hypothesis: TOS has a unit root

Exogenous: Constant
Lag Length: 2 (Automatic - based on SIC, maxlag=7)

t-Statistic Prob.*

Augmented Dickey-Fuller test statistic 3.064641 1.0000

Test critical values: 1% level -3.679322
5% level -2.967767
10% level -2.622989

*MacKinnon (1996) one-sided p-values.

Augmented Dickey-Fuller Test Equation

Dependent Variable: D(TOS)
Method: Least Squares
Date: 12/17/22 Time: 14:39
Sample (adjusted): 1993 2021

58
Included observations: 29 after adjustments

Variable CoefficientStd. Error t-Statistic Prob.

TOS(-1) 0.084807 0.027673 3.064641 0.0052

D(TOS(-1)) 0.940590 0.204984 4.588612 0.0001
D(TOS(-2)) -0.646135 0.273023 -2.366600 0.0260
C -547.7865 1900.444 -0.288241 0.7755

R-squared 0.837122 Mean dependent var 13310.76

Adjusted R-squared 0.817576 S.D. dependent var 15167.48
S.E. of regression 6478.197 Akaike info criterion 20.51771
Sum squared resid 1.05E+09 Schwarz criterion 20.70631
Log likelihood -293.5069 Hannan-Quinn criter. 20.57678
F-statistic 42.82959 Durbin-Watson stat 2.101047
Prob(F-statistic) 0.000000

CPS at Level for South Africa

Null Hypothesis: CPS has a unit root

Exogenous: Constant
Lag Length: 1 (Automatic - based on SIC, maxlag=7)

t-Statistic Prob.*

Augmented Dickey-Fuller test statistic 0.828801 0.9929

Test critical values: 1% level -3.670170
5% level -2.963972
10% level -2.621007

*MacKinnon (1996) one-sided p-values.

59
Augmented Dickey-Fuller Test Equation
Dependent Variable: D(CPS)
Method: Least Squares
Date: 12/17/22 Time: 14:41
Sample (adjusted): 1992 2021
Included observations: 30 after adjustments

Variable CoefficientStd. Error t-Statistic Prob.

CPS(-1) 0.011094 0.013386 0.828801 0.4145

D(CPS(-1)) 0.546044 0.183903 2.969200 0.0062
C 42484.99 22876.77 1.857123 0.0742

R-squared 0.447048 Mean dependent var 130322.0

Adjusted R-squared 0.406088 S.D. dependent var 89895.54
S.E. of regression 69278.60 Akaike info criterion 25.22430
Sum squared resid 1.30E+11 Schwarz criterion 25.36442
Log likelihood -375.3645 Hannan-Quinn criter. 25.26912
F-statistic 10.91440 Durbin-Watson stat 1.953456
Prob(F-statistic) 0.000336

Johansen Co-Integration Test for Nigeria

Date: 12/17/22 Time: 14:50

Sample (adjusted): 1992 2021
Included observations: 30 after adjustments
Trend assumption: Linear deterministic trend
Series: GDP TOD TOS CPS

60
Lags interval (in first differences): 1 to 1

Unrestricted Cointegration Rank Test (Trace)

Hypothesized Trace 0.05

No. of CE(s) Eigenvalue Statistic Critical Value Prob.**

None * 0.820531 103.8786 47.85613 0.0000

At most 1 * 0.601186 52.34606 29.79707 0.0000
At most 2 * 0.439925 24.76827 15.49471 0.0015
At most 3 * 0.218018 7.377708 3.841466 0.0066

Trace test indicates 4 cointegrating eqn(s) at the 0.05 level

* denotes rejection of the hypothesis at the 0.05 level
**MacKinnon-Haug-Michelis (1999) p-values

Unrestricted Cointegration Rank Test (Maximum Eigenvalue)

Hypothesized Max-Eigen 0.05

No. of CE(s) Eigenvalue Statistic Critical Value Prob.**

None * 0.820531 51.53251 27.58434 0.0000

At most 1 * 0.601186 27.57779 21.13162 0.0054
At most 2 * 0.439925 17.39056 14.26460 0.0155
At most 3 * 0.218018 7.377708 3.841466 0.0066

Max-eigenvalue test indicates 4 cointegrating eqn(s) at the 0.05 level

* denotes rejection of the hypothesis at the 0.05 level
**MacKinnon-Haug-Michelis (1999) p-values

Unrestricted Cointegrating Coefficients (normalized by b'*S11*b=I):

61
GDP TOD TOS CPS
-0.000828 0.000485 0.001715 -0.001128
-0.018559 0.002789 -0.001180 0.000202
0.007384 0.002995 0.002206 -0.002568
-0.009673 0.002917 0.002340 -0.002475

Unrestricted Adjustment Coefficients (alpha):

D(GDP) -7.372562 17.99658 7.755188 5.909442

D(TOD) 387.6935 -119.1125 26.00170 201.2077
D(TOS) 556.8783 58.68688 164.2197 -32.12798
D(CPS) 276.5878 -286.6324 496.2708 -65.56971

Log
1 Cointegrating likelih
Equation(s): ood -826.9116

Normalized cointegrating coefficients (standard error in parentheses)

GDP TOD TOS CPS
1.000000 -0.586014 -2.071154 1.361717
(0.49719) (0.43541) (0.43157)

Adjustment coefficients (standard error in parentheses)

D(GDP) 0.006106
(0.00492)
D(TOD) -0.321107
(0.08346)
D(TOS) -0.461234
(0.06317)
D(CPS) -0.229083

62
 (0.14474)

Log
2 Cointegrating likelih
Equation(s): ood -813.1227

Normalized cointegrating coefficients (standard error in parentheses)

GDP TOD TOS CPS
1.000000 0.000000 0.799774 -0.484270
(0.09899) (0.06578)
0.000000 1.000000 4.899077 -3.150073
(0.63236) (0.42017)

Adjustment coefficients (standard error in parentheses)

D(GDP) -0.327893 0.046612
(0.08677) (0.01322)
D(TOD) 1.889506 -0.144017
(1.81673) (0.27683)
D(TOS) -1.550405 0.433960
(1.39923) (0.21321)
D(CPS) 5.090536 -0.665136
(3.05915) (0.46615)

Log
3 Cointegrating likelih
Equation(s): ood -804.4274

Normalized cointegrating coefficients (standard error in parentheses)

GDP TOD TOS CPS
1.000000 0.000000 0.000000 -0.029688
(0.00270)

63
0.000000 1.000000 0.000000 -0.365495
(0.01363)
0.000000 0.000000 1.000000 -0.568388
(0.01202)

Adjustment coefficients (standard error in parentheses)

D(GDP) -0.270629 0.069837 -0.016777
(0.08785) (0.01811) (0.01333)
D(TOD) 2.081502 -0.066149 0.862987
(1.95209) (0.40240) (0.29621)
D(TOS) -0.337814 0.925755 1.248300
(1.34837) (0.27795) (0.20460)
D(CPS) 8.754979 0.821066 1.907506
(2.59533) (0.53499) (0.39382)

Johansen Co-Integration Test for South Africa

Date: 12/17/22 Time: 14:55

Sample (adjusted): 1992 2021
Included observations: 30 after adjustments
Trend assumption: Linear deterministic trend
Series: GDP TOD TOS CPS
Lags interval (in first differences): 1 to 1

Unrestricted Cointegration Rank Test (Trace)

Hypothesized Trace 0.05

No. of CE(s) Eigenvalue Statistic Critical Value Prob.**

64
None * 0.595185 63.03323 47.85613 0.0010
At most 1 * 0.529754 35.90350 29.79707 0.0087
At most 2 0.273775 13.26852 15.49471 0.1053
At most 3 0.115195 3.671649 3.841466 0.0553

Trace test indicates 2 cointegrating eqn(s) at the 0.05 level

* denotes rejection of the hypothesis at the 0.05 level
**MacKinnon-Haug-Michelis (1999) p-values

Unrestricted Cointegration Rank Test (Maximum Eigenvalue)

Hypothesized Max-Eigen 0.05

No. of CE(s) Eigenvalue Statistic Critical Value Prob.**

None 0.595185 27.12972 27.58434 0.0571

At most 1 * 0.529754 22.63498 21.13162 0.0305
At most 2 0.273775 9.596875 14.26460 0.2398
At most 3 0.115195 3.671649 3.841466 0.0553

Max-eigenvalue test indicates no cointegration at the 0.05 level

* denotes rejection of the hypothesis at the 0.05 level
**MacKinnon-Haug-Michelis (1999) p-values

Unrestricted Cointegrating Coefficients (normalized by b'*S11*b=I):

GDP TOD TOS CPS

0.032533 5.29E-05 -9.30E-05 -8.26E-06
0.008502 1.27E-06 9.88E-05 -7.37E-06
-0.019116 1.00E-05 -4.62E-05 2.53E-06
-0.004834 -1.19E-06 -5.45E-05 5.97E-06

65
Unrestricted Adjustment Coefficients (alpha):

D(GDP) -1.161747 -14.58782 8.178908 1.819079

D(TOD) -10789.82 12006.46 963.9886 5978.650
D(TOS) 3405.328 2755.812 1085.056 1112.354
D(CPS) 11480.59 -5077.099 -18551.86 14386.48

Log
1 Cointegrating likelih
Equation(s): ood -1151.792

Normalized cointegrating coefficients (standard error in parentheses)

GDP TOD TOS CPS
1.000000 0.001627 -0.002860 -0.000254
(0.00019) (0.00078) (3.8E-05)

Adjustment coefficients (standard error in parentheses)

D(GDP) -0.037795
(0.17262)
D(TOD) -351.0219
(171.246)
D(TOS) 110.7845
(40.5381)
D(CPS) 373.4942
(375.193)

Log
2 Cointegrating likelih
Equation(s): ood -1140.474

Normalized cointegrating coefficients (standard error in parentheses)

66
GDP TOD TOS CPS
1.000000 0.000000 0.013074 -0.000928
(0.00248) (0.00018)
0.000000 1.000000 -9.791443 0.414309
(1.56350) (0.11592)

Adjustment coefficients (standard error in parentheses)

D(GDP) -0.161826 -8.00E-05
(0.14767) (0.00023)
D(TOD) -248.9381 -0.556017
(156.643) (0.24670)
D(TOS) 134.2155 0.183777
(37.3871) (0.05888)
D(CPS) 330.3267 0.601369
(386.226) (0.60827)

Log
3 Cointegrating likelih
Equation(s): ood -1135.676

Normalized cointegrating coefficients (standard error in parentheses)

GDP TOD TOS CPS
1.000000 0.000000 0.000000 -8.92E-05
(2.3E-05)
0.000000 1.000000 0.000000 -0.214036
(0.01884)
0.000000 0.000000 1.000000 -0.064173
(0.00368)

Adjustment coefficients (standard error in parentheses)

67
D(GDP) -0.318178 1.77E-06 -0.001710
(0.15711) (0.00022) (0.00058)
D(TOD) -267.3661 -0.546380 2.145105
(180.027) (0.25083) (0.66705)
D(TOS) 113.4731 0.194624 -0.094799
(42.1447) (0.05872) (0.15616)
D(CPS) 684.9723 0.415906 -0.713272
(419.438) (0.58441) (1.55413)

Error Correction Mechanism for Nigeria

Null Hypothesis: ECM has a unit root

Exogenous: Constant
Lag Length: 0 (Automatic - based on SIC, maxlag=6)

t-Statistic Prob.*

Augmented Dickey-Fuller test statistic -6.433483 0.0000

Test critical values: 1% level -3.699871
5% level -2.976263
10% level -2.627420

*MacKinnon (1996) one-sided p-values.

Augmented Dickey-Fuller Test Equation

Dependent Variable: D(ECM)
Method: Least Squares
Date: 12/17/22 Time: 15:05
Sample (adjusted): 1995 2021

68
Included observations: 27 after adjustments

Variable CoefficientStd. Error t-Statistic Prob.

ECM(-1) -1.085974 0.168800 -6.433483 0.0000

C 0.568009 0.961600 0.590692 0.5600

R-squared 0.623436 Mean dependent var 0.605464

Adjusted R-squared 0.608373 S.D. dependent var 7.984215
S.E. of regression 4.996531 Akaike info criterion 6.126552
Sum squared resid 624.1330 Schwarz criterion 6.222540
Log likelihood -80.70845 Hannan-Quinn criter. 6.155094
F-statistic 41.38970 Durbin-Watson stat 1.275613
Prob(F-statistic) 0.000001

Error Correction Mechanism for South Africa

Null Hypothesis: ECM has a unit root

Exogenous: Constant
Lag Length: 0 (Automatic - based on SIC, maxlag=6)

t-Statistic Prob.*

Augmented Dickey-Fuller test statistic -9.612966 0.0000

Test critical values: 1% level -3.699871
5% level -2.976263
10% level -2.627420

*MacKinnon (1996) one-sided p-values.

69
Augmented Dickey-Fuller Test Equation
Dependent Variable: D(ECM)
Method: Least Squares
Date: 12/17/22 Time: 15:11
Sample (adjusted): 1995 2021
Included observations: 27 after adjustments

Variable CoefficientStd. Error t-Statistic Prob.

ECM(-1) -1.577414 0.164092 -9.612966 0.0000

C 0.023805 2.416056 0.009853 0.9922

R-squared 0.787069 Mean dependent var 0.495402

Adjusted R-squared 0.778552 S.D. dependent var 26.67249
S.E. of regression 12.55161 Akaike info criterion 7.968762
Sum squared resid 3938.572 Schwarz criterion 8.064750
Log likelihood -105.5783 Hannan-Quinn criter. 7.997304
F-statistic 92.40912 Durbin-Watson stat 2.090330
Prob(F-statistic) 0.000000

Long Run Regression Estimates for Nigeria

ARDL Long Run Form and Bounds Test

Dependent Variable: D(GDP)
Selected Model: ARDL(4, 4, 4, 1)
Case 2: Restricted Constant and No Trend
Date: 12/17/22 Time: 15:20
Sample: 1990 2021
Included observations: 28

Conditional Error Correction Regression

70
Variable Coefficient Std. Error t-Statistic Prob.

C -27.96098 6.997468 -3.995871 0.0021

GDP(-1)* 0.852550 0.141400 6.029365 0.0001
TOD(-1) 0.002575 0.012855 0.200289 0.8449
TOS(-1) 0.081899 0.012063 6.789054 0.0000
CPS(-1) -0.067471 0.006942 -9.719235 0.0000
D(GDP(-1)) -1.330853 0.187771 -7.087652 0.0000
D(GDP(-2)) -0.312476 0.148631 -2.102363 0.0594
D(GDP(-3)) -0.204737 0.211922 -0.966098 0.3548
D(TOD) 0.018169 0.005165 3.518057 0.0048
D(TOD(-1)) 0.023038 0.013258 1.737695 0.1101
D(TOD(-2)) 0.089478 0.015237 5.872365 0.0001
D(TOD(-3)) 0.123130 0.016065 7.664591 0.0000
D(TOS) 0.025413 0.011644 2.182432 0.0516
D(TOS(-1)) -0.044854 0.018079 -2.481019 0.0305
D(TOS(-2)) -0.093934 0.012144 -7.735001 0.0000
D(TOS(-3)) -0.045651 0.010757 -4.243674 0.0014
D(CPS) -0.025332 0.006682 -3.791241 0.0030

* p-value incompatible with t-Bounds distribution.

Levels Equation
Case 2: Restricted Constant and No Trend

Variable Coefficient Std. Error t-Statistic Prob.

TOD -0.003020 0.015425 -0.195789 0.8483

TOS -0.096064 0.017535 -5.478500 0.0002
CPS 0.079140 0.012560 6.301069 0.0001
71
C 32.79689 3.938314 8.327649 0.0000

EC = GDP - (-0.0030*TOD -0.0961*TOS + 0.0791*CPS +

32.7969 )

Null Hypothesis: No levels

F-Bounds Test relationship

Test Statistic Value Signif. I(0) I(1)

Asymptotic:
n=1
000
F-statistic 34.77391 10% 2.37 3.2
k 3 5% 2.79 3.67
2.5% 3.15 4.08
1% 3.65 4.66

Finite
Sam
ple:
n=3
Actual Sample Size 28 5
10% 2.618 3.532
5% 3.164 4.194
1% 4.428 5.816

Finite
Sam
ple:
n=3
0
10% 2.676 3.586
5% 3.272 4.306

72
 1% 4.614 5.966

Long Run Regression Estimates for South Africa

ARDL Long Run Form and Bounds Test

Dependent Variable: D(GDP)
Selected Model: ARDL(4, 3, 2, 3)
Case 2: Restricted Constant and No Trend
Date: 12/17/22 Time: 15:32
Sample: 1990 2021
Included observations: 28

Conditional Error Correction Regression

Variable Coefficient Std. Error t-Statistic Prob.

C 162.8721 52.07643 3.127558 0.0087

GDP(-1)* -1.479446 0.533016 -2.775615 0.0168
TOD(-1) -0.001450 0.000696 -2.083009 0.0593
TOS(-1) 0.000126 0.001222 0.102791 0.9198
CPS(-1) 0.000441 0.000152 2.899035 0.0134
D(GDP(-1)) 1.421979 0.369772 3.845558 0.0023
D(GDP(-2)) 0.702169 0.403544 1.740008 0.1074
D(GDP(-3)) 0.879391 0.305348 2.879967 0.0138
D(TOD) -0.000497 0.000311 -1.596218 0.1364
D(TOD(-1)) 0.001277 0.000377 3.390766 0.0054
D(TOD(-2)) 0.000825 0.000395 2.091014 0.0585
D(TOS) 0.000250 0.001272 0.196917 0.8472
D(TOS(-1)) 0.002524 0.001458 1.730332 0.1092
D(CPS) 7.25E-05 9.91E-05 0.730914 0.4789

73
D(CPS(-1)) -0.000565 0.000145 -3.893578 0.0021
D(CPS(-2)) -0.000186 0.000135 -1.377933 0.1934

* p-value incompatible with t-Bounds distribution.

Levels Equation
Case 2: Restricted Constant and No Trend

Variable Coefficient Std. Error t-Statistic Prob.

TOD -0.000980 0.000175 -5.609166 0.0001

TOS 8.49E-05 0.000807 0.105183 0.9180
CPS 0.000298 3.59E-05 8.300108 0.0000
C 110.0899 8.156027 13.49798 0.0000

EC = GDP - (-0.0010*TOD + 0.0001*TOS + 0.0003*CPS +

110.0899 )

Null Hypothesis: No levels

F-Bounds Test relationship

Test Statistic Value Signif. I(0) I(1)

Asymptotic:
n=1
000
F-statistic 3.441691 10% 2.37 3.2
k 3 5% 2.79 3.67
2.5% 3.15 4.08
1% 3.65 4.66

Actual Sample Size 28 Finite

Sam
ple:

74
 n=3
5
10% 2.618 3.532
5% 3.164 4.194
1% 4.428 5.816

Finite
Sam
ple:
n=3
0
10% 2.676 3.586
5% 3.272 4.306
1% 4.614 5.966

Short Run Result for Nigeria

Dependent Variable: D(GDP)

Method: ARDL
Date: 12/17/22 Time: 15:54
Sample (adjusted): 1995 2021
Included observations: 27 after adjustments
Maximum dependent lags: 4 (Automatic selection)
Model selection method: Akaike info criterion (AIC)
Dynamic regressors (4 lags, automatic): D(TOD) D(TOS)
D(CPS)
Fixed regressors: C
Number of models evalulated: 500
Selected Model: ARDL(3, 4, 4, 1)

Variable CoefficientStd. Error t-Statistic Prob.*

75
D(GDP(-1)) 0.317620 0.165304 1.921424 0.0810
D(GDP(-2)) 0.889457 0.173695 5.120799 0.0003
D(GDP(-3)) 0.237414 0.114469 2.074053 0.0623
D(TOD) 0.012345 0.005149 2.397554 0.0354
D(TOD(-1)) 0.014091 0.005821 2.420897 0.0340
D(TOD(-2)) 0.063074 0.010527 5.991712 0.0001
D(TOD(-3)) 0.049385 0.019951 2.475271 0.0308
D(TOD(-4)) -0.110575 0.017551 -6.300358 0.0001
D(TOS) 0.013444 0.007612 1.766119 0.1051
D(TOS(-1)) 0.012673 0.007103 1.784188 0.1020
D(TOS(-2)) -0.041455 0.007832 -5.293343 0.0003
D(TOS(-3)) 0.029774 0.016075 1.852234 0.0910
D(TOS(-4)) 0.049566 0.009907 5.003096 0.0004
D(CPS) -0.014516 0.006714 -2.162189 0.0535
D(CPS(-1)) -0.045707 0.005162 -8.854735 0.0000
C 4.293206 4.162213 1.031472 0.3245

R-squared 0.960939 Mean dependent var 15.07222

Adjusted R-squared 0.907674 S.D. dependent var 37.30716
S.E. of regression 11.33586 Akaike info criterion 7.981063
Sum squared resid 1413.519 Schwarz criterion 8.748966
Log likelihood -91.74435 Hannan-Quinn criter. 8.209401
F-statistic 18.04070 Durbin-Watson stat 1.716362
Prob(F-statistic) 0.000013

*Note: p-values and any subsequent tests do not account for model
selection.

Short Run Result for South Africa

76
Dependent Variable: D(GDP)
Method: ARDL
Date: 12/17/22 Time: 16:00
Sample (adjusted): 1994 2021
Included observations: 28 after adjustments
Maximum dependent lags: 4 (Automatic selection)
Model selection method: Akaike info criterion (AIC)
Dynamic regressors (4 lags, automatic): D(TOD) D(TOS)
D(CPS)
Fixed regressors: C
Number of models evalulated: 500
Selected Model: ARDL(1, 3, 0, 3)
Note: final equation sample is larger than selection sample

Variable CoefficientStd. Error t-Statistic Prob.*

D(GDP(-1)) 0.569490 0.257195 2.214234 0.0408

D(TOD) -0.000221 0.000214 -1.033032 0.3161
D(TOD(-1)) 0.000540 0.000209 2.583530 0.0193
D(TOD(-2)) 6.20E-05 0.000280 0.221653 0.8272
D(TOD(-3)) -0.000462 0.000248 -1.861872 0.0800
D(TOS) 0.000126 0.000576 0.218789 0.8294
D(CPS) -4.58E-05 9.27E-05 -0.494035 0.6276
D(CPS(-1)) -0.000274 0.000122 -2.242858 0.0385
D(CPS(-2)) 0.000148 0.000136 1.087136 0.2922
D(CPS(-3)) 0.000147 0.000103 1.428748 0.1712
C 10.60761 11.15131 0.951243 0.3548

R-squared 0.655470 Mean dependent var 9.741071

Adjusted R-squared 0.452805 S.D. dependent var 36.67863
S.E. of regression 27.13215 Akaike info criterion 9.726039

77
Sum squared resid 12514.61 Schwarz criterion 10.24941
Log likelihood -125.1645 Hannan-Quinn criter. 9.886037
F-statistic 3.234253 Durbin-Watson stat 1.926918
Prob(F-statistic) 0.016164

*Note: p-values and any subsequent tests do not account for model
selection.

78