Financial Liberalization and Export Promotion: Evidence From Nigeria (1987 – 2018)

Abstract

Financial liberalization policy is expected to enhance credit allocation to important sector in the economy. With previous studies mainly focusing on the effect of financial liberalization on economic growth in Nigeria, this study explored the effect of financial liberalization on export promotion in Nigeria from 1987-2018. The study used secondary data obtained from Central Bank of Nigeria Statistical Bulletin (2018). Techniques such as Augmented Dickey–Fuller (ADF), Philip Perron, Bound Co-integration Test, Autoregressive Distributed Lag and Pairwise Granger Causality were employed. It was found from the unit result that lending rate was stationary at level form while loan on export, savings rate, gross domestic product, exchange rate and trade openness were integrated at first difference. Also, long run relationship was established among the variables. The ARDL result showed that loan on export, gross domestic product and trade openness significantly enhanced total export while savings rate and exchange rate negatively influenced total export in Nigeria. Furthermore, the Pairwise causality test revealed that loan to export, gross domestic product and exchange rate granger caused total export. The study concluded that financial liberalization has the potential of enhancing exportation in Nigeria through the provision of adequate credit to export based firms. It was recommended that, adequate credit should be given to export based industries at low rate of at least 12%, also, savings rate should be push upward to a threshold of at least 10% to increase savings and resources mobilization of financial and finally, exchange rate should be stabilized through adoption of effective policies.