Faculty: Management Sciences
Department: Banking And Finance


Kayode, O. F.
Ibenta, S. N.
Nwakoby, C.


The manufacturing sector is expected to be the engine for growth and development in any economy. The sector has continued to face several challenges hindering its optimal performance in Nigeria. In an attempt to revitalize the sector to play the expected roles, there have been concerted efforts by successive governments in Nigeria to deepen the financial system through the implementations of several financial reforms. Despite these efforts, it seems that the manufacturing firms in Nigeria have not achieved the desired level of performance. Based on the foregoing, this study investigated the effect of financial deepening on manufacturing firms’ performance in Nigeria. The data from 1986 to 2017, used for the study were sourced from the publications of the Central Bank of Nigeria, National Bureau of Statistics and World Economic Indicators. Autoregressive Distributed Lag model was used to produce the parameter estimates. Also, Toda-Yamamoto causality procedure was applied to examine the causation among the variables. Further, the validity of the results was examined using Breusch-Pagan-Godfrey test. The findings reveal that financial deepening had a significant positive effect on the average capacity utilization; a significant negative effect on the index of manufacturing production and contributions of manufacturing sector to Gross Domestic product (GDP) in Nigeria. Further, the finding shows a unidirectional causality from financial deepening to average capacity utilization of manufacturing sector in Nigeria. The major implication of the findings is that financial deepening had no significant effect on manufacturing sector performance in Nigeria. It is therefore recommended among others that government should promote financial deepening strategies by removing the cap on deposit rate, to promote competition in saving mobilization, relax capital market entry requirements to attract the small and medium scale manufacturing firms to be listed in the capital market, and establish a special single-digit lending rate scheme for manufacturing firms directly from the Central Bank of Nigeria to encourage credit to the private sector, thereby promoting manufacturing sector performance in Nigeria.