Impact of Financial Intermediation on Manufacturing Sector Output In Nigeria

Abstract

This paper examines the impact of financial intermediation on manufacturing output in Nigeria between 2012 and 2021. The actions of financial intermediation bore the names of deposit mobilisation, credit provision to the manufacturing industry, and the rate of interest. Through ordinary least squares regression analysis, the study found that deposit mobilisation has a positive and significant effect on manufacturing industry output, with a p-value of 0.0025, which is vital at the 1% level. Credit extension to the manufacturing sector was also observed to have a positive and significant impact on the sector's output, with a p-value of 0.0421, which is statistically significant at the 5% level. The value of the coefficient of determination (R²) of 0.941684 indicates that the independent variables explain 94.16% of the variation in manufacturing sector output. The study has concluded that financial intermediation plays a pivotal role in realising the potential of the manufacturing sector in Nigeria. It has been recommended that the Central Bank of Nigeria design monetary policies with a view to increasing financial savings and seek ways to provide incentives to banks in an effort to encourage more savings to be deposited and lent to the manufacturing sector.