An Investigation of the Impact of Financial Liberalization Reforms on Credit to the Private Sector in Nigeria

Abstract

This study examines the effects of financial liberalization on credit to the private sector in the Nigerian economy from 2000 to 2021. This was aimed at ascertaining how DEP representing banking sector deposits, IRS representing interest rate spread and MPR representing monetary policy rates has stimulated the credit to the private sector in Nigeria. Historical data was collated and estimated employing the ARDL form of Ordinary Least Squares (OLS) technique. The empirical results indicate that bank deposits was positively significant to private sector credits while monetary policy rates were negatively significant. On the contrary, interest rate spread had negative impact but not statistically significant. On the basis of the findings of this study, the following recommendations are made.The monetary authorities have to regularly review their monetary policy direction to bring monetary policy rates lower than it is. Policies that reduce interest rate spread be pursued to enhance the performance of the credit to the private sector.