The Role of Non-bank Financial Institutions on Financial Intermediation Process in Nigeria (1992-2014)

The role of non-bank financial institution towards financial intermediation process in Nigeria is not fully noticed. It is against this background that we assess the effect of non-bank financial institutions on financial intermediation process as well as the long run relationship between non-bank financial institutions and financial intermediation process in Nigeria for the period 1992 to 2014. Before we estimated the model, we subjected the model to diagnostic test of heteroskedasticity, serial correlation, Ramsey specification and multicollinearity test. The unit root test was conducted for all the variables to ensure they are free from stationarity defect. The long run relationship was tested using the Johansen co-integration approach and the effect assessment by granger causality effect test. The unit root result indicates that the variables were stationary at first difference and free from stationarity defect associated with most time series data. Johansen co-integration result reveals the presence of a long run relationship between non-bank financial institutions and financial intermediation process in Nigeria. The granger causality test on effect assessment reveals that it is only primary mortgage institutions activities that have significant effect on financial intermediation process while there is no evidence of the significant effect of discount houses, microfinance banks and finance companies on financial intermediation process. In view of the positive relationship between non-bank financial institutions and financial intermediation process, monetary authorities should put in place adequate regulatory framework for the operation of non-bank financial institutions in Nigeria especially primary mortgage institutions as it has significant effect on financial intermediation process based on the finding of this study.