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Financial development is considered as a vital tool in any inclusive growth decision since we are aware that adequate and accessible financial information and data creates link a between an economy and its financial institutions This study was therefore an attempt to find out the relationship between financial development and inclusive growth in the Nigerian economy and to know the factors necessary for attaining a higher level of growth through inclusive growth in Nigeria The work has been written in chapters in line with the Nigerian economy The researcher made use of secondary data collected from the CBN statistical bulletin for the study The study also went through hypothesis testing process data presentation and analysis It was there by discovered that financial development has a negative relationship with inclusive growth in Nigeria I found out that a unit increase the ratio of broad money supply to GDP and the ratio of credit allocated to the private sector to GDP would cause a decrease in per capita income by a certain percentage This implies that once reliable and accessible financial information are provided in an economy it leads to efficient allocation of finances and adequate management of these funds which in turn leads to adequate participation of these sectors in the growth process of the economy This leads to inclusive growth in the  Nigerian economy On the contrary if these resources are mismanaged due to inadequate development in the financial system it hinders growth









Every economy targets the attainment of its desired objectives. Inclusive growth is one major objective of any economy. The economy therefore aims towards efficiency and proper effectiveness in conducting its affairs. However, the level of this efficiency and effectiveness of an economy or the extent to which it is able to achieve its desired goals to a large extent depends on the quality of available and accessible financial information, and how the economy utilizes the available information. This implies that financial development is essential for sustainable growth and development which deals with the problem of inclusive growth. According to the World Bank growth report (2008), growth is said to be inclusive when the growth is sustainable in the long run, and it should be broad across all sectors and inclusive of part of the country’s labour force. Inclusive growth is a system which advocates   equitable contribution of various sectors of an economy to its growth process and it cannot be achieved in isolation of a properly developed financial sector or system. Nigeria is a country enriched with various natural resources and an efficient labour force but with the dwindling nature of the Nigerian economy today and the threat that it might get worst in future, proper financing of the various sectors in the Nigerian economy to increase their contributions to the economy is required. Nigeria’s over dependence on the oil sector has led to the decreasing nature of the country’s standard of living and the increasing nature of abject poverty and inequality. The increasing figures in the Nigerian GDP cannot be compared to the decrease in the actual growth experienced in the economy today. The usage of the term “inclusive” in the characterization of growth episodes can be traced back at least to the turn of the century when Kakwani and Pernia (2000) employed it to highlight the contents of pro-poor growth as that one which enables the poor to actively participate in it and benefit from the growth process. Inclusive growth involved both poverty and inequality reduction.

Inclusive growth and financial development is the solution to the various problems existing in many less developed countries especially Nigeria. Inclusive growth is disadvantage reducing growth (Klasen, 2010). Growth Report (2010) notes that inclusiveness is a concept that encompass equity, equality of opportunity and protection in market and employment transitions. World Bank (2009) stated that inclusive growth can be achieved by focusing on expanding the regional scope of economic growth, expanding access to assets and thriving markets and expanding equity in the opportunities for next generation. McKinley (2010) identifies that inclusive growth entails achieving sustainable growth that will create and expand economic opportunities and ensuring broader access to these opportunities so that members of society can participate in and benefit from growth.

Developing the financial sector accelerates economic growth and more productive allocation of capital which leads to higher income growth and portends a sustained strong and progressively inclusive growth. Financial development involves improvements in producing information and allocating capital. Operating a mono economy in any developing economy hinders inclusive growth in Nigeria for instance the oil sector has been contributing immensely to our gross domestic product but with the fall in the price of crude oil which is the major raw material for foreign trade the whole economy is unstable. The oil sector is properly financed which increases its fast revenue yielding capacity. For any sector to be able to contribute immensely to the growth of the Nigerian economy it has to be properly financed, and for finances to be properly allocated to all the sectors in the Nigerian economy the financial system has to be well organized and developed. However, finance allocation to these sectors has to be done with caution to avoid widening the gap between the rich and the poor which triggers the core economic problems in every economy. Recent survey evidence suggests that access to finance has a direct nexus with faster rates of innovation and firm dynamism consistent with the cross-country finding that finance promotes growth through increase in productivity (Ayyagari, M., Demirgüç-Kunt, A. and Maksimovic, V, 2007b, Levine, 1998, 1999). Further, it has also been revealed that financial development plays a significant role in moderating the impact of external shocks on the domestic economy (Beck, Lundberg, and Majnoni, 2006 and Raddatz, 2006).


From  the background to the study we observed that for inclusive growth to be achieved in the Nigerian economy all its sectors has to be financed properly for it to contribute intensively to the economic growth process. Better functioning financial systems foster economic growth, poverty alleviation; moreover, a more equitable distribution of economic opportunities enhances overall economic development. It is critical that financial development leads to inclusive growth. This brings us to certain key questions: Who benefits from a better financial system? Does financial development induce an increase in per capita Gross Domestic Product (GDP) only because the very rich are getting even richer? Does finance expand economic opportunities for the bulk of society? Economic theory suggests that finance shapes the distribution of economic opportunities. The financial system affects the degree to which a person’s economic opportunities are defined. According to the extent that the financial system performs these functions well, economies tend to grow correspondingly faster. For example, when banks screen borrowers effectively and identify firms with the most promising prospects, this is a step in boosting productivity growth. (Nasr, Sahar. 2014. Main report. Washington, DC; World Bank Group). The pressure on the oil sector leads to negligence of other economic sectors that can contribute to growth and it hinders growth inclusiveness by reducing the finance and resource allocation meant for these sectors which in turn reduces their contribution to the Nigerian economic growth. These leads to the problem in the Nigerian economy today which can be summarized as follows:

  • The problem of unequal contribution of the various sectors that make up the Nigerian economy to its growth process.
  • The problem of inadequate financial information which hinders financial development in Nigeria economy.
  • Improper allocation of resources and finances to the various sectors involved in the Nigerian growth process.


The general purpose of this research work is to examine the relationship between the financial development and growth in Nigeria including its effects on sustainable growth required in the Nigerian economy.

The specific objectives of this study are:

  • To examine the contributions of financial development to inclusive growth in the Nigerian economy.
  • To understand the factors necessary for attaining a higher level of sustained growth through inclusive growth and financial development in Nigeria.


The significance of this study cuts across various levels and stages of growth in the Nigerian economy, it also takes into account the present level of growth and its sustainability in Nigeria. Findings from this study will improve the various sectors in the economy by encouraging public and private sectors to adopt and promote policies for inclusive growth in Nigeria since inclusive growth also involves making the best use of all resources both young and old, men and women, labour markets, education and training programs to maximize opportunity and inclusiveness (Promoting Inclusive Growth OECD issues vol. 3). Also the policymakers would be encouraged to suggest and implement policies that promote sustainable development and then critically analyze the previously implemented policies. OECD reports suggests that if we know that the benefits of growth do not automatically trickle down to generate more equal societies, we need to adopt a new inclusive approach to policy making that looks at the social as well as the economic effects of policy actions.


  • Is there any relationship between growth and financial development?
  • What are the factors necessary for achieving a higher level of growth in the Nigerian economy?


Ho1 = Null Hypothesis

There is no significant relationship between financial development and growth in the Nigerian economy.

H02 -Null Hypothesis

Financial development does not lead to inclusive growth in the Nigerian economy.


This study is limited to the entire groups and organizations interested in promoting sustainable growth and development in the Nigerian economy. It focuses on increasing contributions of various economic sectors to the growth process of the Nigerian economy.Any other reference is just for a better understanding of the subject topic but not within the scope.


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