Financial sector deregulation, private sector credit and aggregate economic performance in Nigeria

Abstract

In recent years, various governments in Nigeria have continued to give priority to private sector development as a strategy for self-reliance industrialization. This study examines financial sector deregulation, private sector credit and aggregate economic performance in Nigeria. The main objective of the study is to determine whether financial sector deregulation has helped in stimulating the impact of private sector credit on aggregate economic performance in Nigeria for the period 1982-2018. Data on the growth rate of real GDP, financial depth, private sector credit, prime lending rate and gross fixed capital formation were the variables used in the study. A dummy variable was also used as a proxy for financial deregulation. ARDL approach was adopted to estimate the data set. The empirical results show that there is cointegration between aggregate economic performance and independent variables; private sector credit has a negative and significant impact on aggregate economic performance; and that financial sector deregulation has been able in stimulating the impact of private sector credit on aggregate economic performance in Nigeria, though, not satisfactorily because of policy inconsistency. It is therefore recommended that to achieve vibrant private sector-driven economy, the government and the policymakers should strengthen the supervisory ability of the regulatory bodies to ensure that the funds approved for private sector investment are channeled to the sector.