Abstract:

This study investigates the operation of merchant bank on economic development in Nigeria. The data used in this study were collected from the period of 2010 to 2015. Augmented Dickey Fuller (ADF) and Philip Perron unit root test, ordinary least square and granger causality test have been used. Unit root test confirms the stationary of all variables at first difference. Regression results indicate that deposits, investments, advances, profitability and interest earnings have significant positive impact on economic development in Nigeria. The Granger-Causality test confirms the bidirectional causal relationship of deposits, advances and profitability with economic growth. On the other side we found unidirectional causal relationship of investments and interest earnings with economic growth runs from investments and interest earnings to economic growth. It is recommended that the policy makers should make policies to enhance the banking sector in Nigeria because banking sector is significantly contributing to the economic development in Nigeria.