Does Financial Sector Development Hinders or Promotes Human Development in Nigeria? Asymmetric and Causality Analysis

This study examines the relationship between financial sector development and human development in Nigeria for the period of 1986 to 2018 using Non-linear Auto Regressive Distributed Lag (NARDL) and Toda Yamamoto Granger non-causality approaches. Empirical findings that emanated from the study reveal the existence of nonlinear relationship between financial sector development indices and human development in Nigeria. Further, feedback from the Toda Yamamoto Granger non-causality test shows that money supply constitutes the only variable exerting bidirectional nexus with human development. Conversely, bank deposit appeared to have a unidirectional relationship with human development whereas other indicators like domestic credit to GDP and bank penetration have no causal relationship with human development within the period of study. Prominent policy implication derivable from the empirical analyses suggests the need for the monetary policy authority to place more emphasis on quantity-based monetary tools such as liquidity ratio and reserve ratio for managing the economy.