THEORY OF FINANCIAL INTER-MEDIATION Credit is an important aspect of financial intermediation that provides funds to those economic entities that can put them to the most productive
use. Theoretical studies have established the relationship that exists between financial inter-mediation and economic growth. For instance, Schumpeter (1934), Goldsmith (1969), McKinnon (1973) and Shaw (1973), in their studies, strongly emphasized the role of financial inter-mediation in economic growth.
In the same vein, Greenwood and Jovanovich (1990) observed that financial development can lead to rapid growth. In a related study, Bencivenga and Smith (1991) explained that development of banks and efficient financial inter-mediation contribute to economic growth by channeling savings to high productive activities and reduction of liquidity risks. They therefore concluded that financial inter-mediation leads to growth. Based on this assertion, this study examines the extent to which inter-mediation or credit to various sectors of the economy has influenced economic growth in Nigeria
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