Financial System Development and Gross Capital Formation in Nigeria

The study examined the effect of financial system development and gross capital formation in Nigeria, over a 15-year period, from 2009 to 2023. The specific objectives of the study were to examine the effect of financial openness on gross capital formation in Nigeria, the impact of financial deepening on gross capital formation in Nigeria., determine the influence of market capitalization on gross capital formation in Nigeria, assess the effect of value of stock traded on gross capital formation in Nigeria., and to evaluate the impact of insurance penetration on gross capital formation in Nigeria. To this end, the longitudinal research design was utilized in this study. The findings revealed that financial openness (FINOPEN) has a weak negative relationship with gross fixed capital formation (GFCF) in Nigeria both in the short run and in the long run, that financial deepening (FNDEEP) is a significant determinant of gross fixed capital formation (GFCF) in Nigeria in the short run; but in the long run, it does not have any significant impact, that market capitalization (MACAP) has a weak positive effect on gross fixed capital formation (GFCF) in the short run; but in the long run, it is a potent factor, that value of stock traded (VASTOC) does not have significant impact on gross fixed capital formation (GFCF) in Nigeria both in the short run and in the long run, that insurance penetration (INSPEN) has a significant negative relationship with gross fixed capital formation (GFCF) in the short run; but in the long run, it does not significantly affect gross fixed capital formation., and that in the short run, total insurance premium (TOPREM) is a significant factor in the determination of gross fixed capital formation (GFCF), but not in the long run. The study concludes that that, market capitalization (MACAP) is a very potent financial system development variable for enhancing GFCF in Nigeria in the long run; while in the short run, deepening (FNDEEP), insurance penetration (INSPEN) and total insurance premium (TOPREM) are relevant factors to be considered in terms of improving the level of gross fixed capital formation (GFCF) in Nigeria