Does Financial Development Promote Export Diversification in Nigeria: An Empirical Analysis

The study seeks to answer the question whether financial development promotes export diversification in Nigeria using secondary data sourced from the Central Bank of Nigeria and the United Nations Conference on Trade and Development from 1995 to 2023. The specific objectives were to examine the effects of financial development on export diversification and determine the direction of causality between financial development and export diversification in Nigeria. To achieve the stated objectives, the study employed the short-run autoregressive distributive lag technique to examine the relationship between the dependent variable and the independent variables. Findings show that financial development has a negative and significant effect on export diversification in Nigeria, while investment has a positive and insignificant relationship with export diversification in Nigeria. The study recommends that the government should reform financial sector policies to ensure that financial development supports a wider range of sectors, especially non-oil export sectors. This may include incentivizing financial institutions to provide credit and financial services to small and medium enterprises (SMEs) in manufacturing and agriculture, which are key to diversification and focus on improving the quality of investments by promoting infrastructure development, especially in sectors with high export potential like agriculture, manufacturing, and technology.