Nexus Between Financial Sector And Sustainable Development In Nigeria: A Principal Component Analysis
The financial sector has been recognized in the literature as a potential that could drive sustainable development in the developing nations and Nigeria is no exception. This study examined the link between financial sector and sustainable development in Nigeria. Specifically, study seeks to investigate the effects of the banking, stock market, and the insurance segments on sustainable development in Nigeria. Based on data availability, a time series data from 1986-2015 were obtained. The data for sustainable development-economic development, social development, and environmental quality were aggregated using the principal component analysis (PCA). The aggregated index for sustainable development and the financial sector data were subjected to ARDL-Bounds estimations. Findings reveal that the banking and the stock market subsectors positively and significantly propel sustainable development in Nigeria, while the insurance subsector drives sustainable development in Nigeria only in the short run. Study therefore; recommend policies strengthening these main segments of the financial sector in order to drive sustainable development in Nigeria. This study contributed to knowledge being a forerunner to holistically combine and study the three main pillars of sustainable development in Nigeria. Study also stands out by connecting the financial sector to sustainable development in Nigeria.
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