International Journal of Economics, Commerce and Management United Kingdom Vol. II, Issue 11, Nov 2014 Licensed under Creative Common Page 1 http://ijecm.co.uk/ ISSN 2348 0386 MACROECONOMIC ANALYSIS OF BANKING SECTOR DEVELOPMENT AND ECONOMIC GROWTH IN NIGERIA Ayunku, Peter E. Department of Finance & Accountancy, Niger Delta University, Bayelsa State, Nigeria peterayunku@yahoo.com Etale, Lyndon M. Department of Finance & Accountancy, Niger Delta University, Bayelsa State, Nigeria lyndonetale@yahoo.com Abstract The study examined the relationship between banking sector development and economic growth in Nigeria for the period 1977 to 2010. Banking sector development is represented by changes in Trade Openness (TO), Credit to Private Sector (PCR), Domestic Credit (DC), Deposit Liability (DL) and Interest Rate (INT) while economic growth is represented by Real Gross Domestic Product (RGDP). The study used causal comparative research design methodology and utilizes econometric techniques such as Augmented Dickey Fuller (ADF) and Phillips Perron (PP) Unit Root tests as well as Johansen Co-integration, followed by Error Correction Model (ECM) tests to analyze secondary data collected from the Central of Nigeria (CBN) annual reports for a period of thirty three years. The result of the study revealed that TO, DC and INT have positive relationship with RGDP while PCR and DL have negative relationship with RGDP. The result of the study therefore lends very strong support to the existence of a short and long-run relationship between banking sector development and economic growth in Nigeria. The study therefore, recommended amongst others that banking sector reforms should be sustained so as to enhance economic growth in Nigeria. Keywords: Banking sector, Efficiency, Banking consolidation, Trade openness, Domestic credit, Economic growth.