Impact of Financial Stability on Economic Growth in Nigeria

Abstract

Economic growth is reflected in SDG8 of the Sustainable Development Goals. Financial stability has been identified as a factor promoting economic growth. However, there is little evidence on the effect of financial stability on economic growth in Nigeria. This study empirically examines the effect of financial stability on economic growth in Nigeria from 1993 to 2017. The results show a positive relationship between financial stability and economic growth in Nigeria. Specifically, the result shows that a high ZSCORE, which reflects low insolvency risk, has a positive effect on economic growth. Similarly, fewer nonperforming loans improve economic growth in Nigeria. In contrast, capital adequacy was found to have a negative effect on economic growth in Nigeria.