Efficacy of Financial Institution Indicators on Capital Formation: The Nigerian Experience

Abstract

This study investigates the efficacy of the Nigerian financial institution indicators in capital formation. It had the specific aim of examining the impact of financial institutions intermediation on capital formation. Against the background of the importance of capital formation on economic growth and the role of financial intermediation in the process of capital formation; the study employed auto regressive distributive lag technique on data gathered from 1991-2021. Financial institution indicators were market capitalization, credit to private sector and insurance sector investments. Results from the estimations showed that for the period under review there exists a long run relationship between the dependent and independent variable, also 94% of the variations in capital formation can be explained to be caused by the variations in the financial institution indicators used. One of the recommendations suggested after the findings was financial sector deepening; this would improve the activities in the financial institutions and thus boost capital formation in Nigeria.