Do the dynamics of financial development spur economic growth in Nigeria's contemporal growth struggle? A fact beyond the figures

This paper investigates whether long-run economic growth can be fostered by the impact of financial development in Nigeria, and what could be the empirical explanations for the factors attributable to the continued backwardness of the Nigerian economy in the current millennium? Is the relationship between financial development and economic growth monotonic? To ensure this, we measure the short run and long run Impact of Financial Development on Economic Growth from 1980 to 2011. The U and the ARDL bounds testing approach to cointegration were applied. The findings of the study established that financial development and population are the only variables that have contributory impacts in fostering economic growth in both the long-run and short-run in Nigeria. While, M3, bank asset, fixed capital formation, trade and private sectors have insignificant contribution to GDP and are the impediments to Nigeria's growth dilemma. In another dimension the research established that, the relationship between FD-GDP is monotonic suggesting that too much finance does not prevail in the Nigerian economy. By policy implication the country will be facing prolonged macroeconomic volatility due to the absence of strong exogenous risk cushioning effects, chaotic and unfavourable investment climate, unemployment and persistent exchange rate instability. Eventually these factors could lead to output failure, deterioration in reserve holding that could translate in to currency crisis and an eventual financial crisis. We recommend the pursuance of synergistic monetary policy model that will not only ensure a sustainable and improved value of the local currency but should also create its foreign demand among others.