Asian Journal of Economics, Finance and Management

This study examined the influence of the financial sector on industrialization in Nigeria from 1981 to 2019. Specifically, the study examined the effect of financial sector development on industrialization; and also investigated the influence of industrialization on economic growth of Nigeria. Data were obtained from the Central Bank of Nigeria Statistical Bulletin and the World Development Indicators. The study utilized the Augmented Dickey-Fuller unit root test, Autoregressive Distributed Lag (ARDL) Bounds test for cointegration, and Error Correction Model. The unit root test reported that the variables were stationary at mixed order of levels I(O), and first difference I(1). This necessitated the use of the ARDL Bounds test for levels relationship. The result indicated that financial sector development exerted a negative and significant effect on industrialization in Nigeria; while a negative and significant effect of deindustrialization on economic growth was also observed. The ARDL Bounds test for conintegration validated the existence of a long-run equilibrium relationship between financial sector development and industrialization; and between industrialization and economic growth in Nigeria. The error correction model revealed that 56.98% of the short-run distortions in industrial productivity is corrected annually so that equilibrium is restored in the long-run; while 93.06% of the short-run distortions in economic growth is corrected annually. It was recommended that previous financial sector reforms should be consolidated to make the financial sector robust to support industrialization, which will propel growth in the Nigerian economy.