Impact of financial development on manufacturing output : The Nigerian evidence

This study examined the influence of financial deepening on manufacturing output in Nigeria. Using the vector autoregression (VAR) based Johansen cointegration technique and an eventual least squares (OLS) estimator on annual data spanning 1970 to 2010, we find insignificant coefficients for credit to the manufacturing sector, banking efficiency and the non-oil trade balance. This suggests a fundamental disconnect between the real and financial sectors of the Nigerian economy. Policymakers should therefore innovate with productivity enhancing reforms which are better tailored to the needs of the manufacturing sector. This should work to boost growth prospects for the aggregate economy.