FINANCIAL INTERMEDIATION AND ITS IMPACT ON NIGERIA’S CAPITAL ACCUMULATION

Abstract

This study investigates the impact of financial intermediation on capital formation in Nigeria, focusing specifically on insurance sector investment, stock market capitalization, and broad money supply. Employing an ex-post facto research design, the study analyzes secondary data from the Central Bank of Nigeria’s Statistical Bulletin covering the period from 1993 to 2023. Using Ordinary Least Squares (OLS) in E-Views 10.0, the findings reveal that insurance sector investment does not significantly impact capital formation, suggesting limitations in the scale or regulatory support of such investments, stock market capitalization is found to be statistically insignificant, indicating that the current state of the Nigerian stock market may lack the depth and investor confidence required to drive capital formation independently. In contrast, broad money supply has a significant positive effect, on capital formation through increased liquidity and credit accessibility. These results conclude that the need for targeted reforms to enhance insurance sector investment, strengthen stock market liquidity and investor confidence, and maintain balanced monetary policy to foster sustainable capital formation in Nigeria and it recommend that the regulatory bodies should implement measures that will boost liquidity and investor confidence, the Central Bank of Nigeria should maintain a balanced approach to monetary policy that promotes credit availability while controlling inflation.