Financial Deepening and Entrepreneurial Growth in Nigeria

Abstract

The study examined the relationship between financial deepening and entrepreneurial growth in Nigeria. It used secondary data collected from Central Bank of Nigeria Statistical Bulletin spanning 1986 to 2016. The study employed Pearson Correlation in establishing relationships between the variables. The results revealed that the ratio of money supply to Gross Domestic Product (M₂/GDP) has a positive but not significant relationship with entrepreneurial growth; the ratio of credit to private sector to GDP (CPS/GDP) has a positive (not significant) relationship with entrepreneurial growth; and the ratio of deposit money banks’ branches to GDP (DMBB/GDP) has a negative and significant relationship with entrepreneurial growth. Thus, the study concludes that money supply and credit to private sector are better indicators of financial deepening that can affect entrepreneurial growth positively in Nigeria. The study therefore recommends an effective manipulation of money supply to increase capital flows to the real sector of the economy to trigger entrepreneurial growth. In addition, the Central Bank of Nigeria should further compel commercial banks to grant more credit facilities to entrepreneurs (private sector), including the young graduates and new entrepreneurs without collaterals to enable them invest in viable projects. Also, more venture capital firms should be established to assist in funding small, early-stage, emerging firms that have high growth potentials resulting in creation of value and wealth.

Keywords: Financial Deepening, Entrepreneurial Growth, Nigeria