Financial liberalisation and economic growth in Nigeria

Abstract

This study investigated the impact of financial liberalisation on economic growth in Nigeria spanning from 1981 to 2021. Data for the study were obtained from Central Bank of Nigeria (CBN) Statistical bulletin. 2021. The formulated model was subjected to unit root test using the Augmented Dicey Fuller and Philip-perron unit root approach. The ADF and PP findings indicated that the variables had heterogeneous order of integration. Some of the variables were stationary at levels 1(0) while others were stationary after first difference 1(1). (1). Based on this, the research utilised the Auto-regressive distributive lag (ARDL) Model to determine the long-run connection as well as the behaviour of the variables. Hence, the study demonstrated that financial liberalisation has long and short-run link with economic growth. Additionally, research revealed that credit to private sector (CPS) has considerable favourable influence on economic growth. On the other hand, prime lending rate (PLR) and financial deepening (FD) had a large negative influence on economic growth in the short-run while deposit savings rate (DSR) had positive but negligible association economic growth in the short-run. The research found that, financial liberalisation has considerable influence on economic growth in Nigeria. It was therefore recommended amongst others that the central bank of Nigeria should look into activities of deposit money bank (DMBs) regarding the continuous rise in lending rate andadopt policy measures that would reduce and make the lending rate attractive to enable the surplus sector of the economy save more funds that would enhance investment and grow the Nigerian economy rather than slow it down.