Abstract
Financial liberalization is theoretically known to be an important driver of economic growth; the emergence of new industries, the availability of money in the circulation and how it affects prices, extent of international trade in the countries among others are necessities that any economy cannot survive without. This paper examines the impact of financial liberalization on economic growth in Nigeria for the period of 1981–2013 using the autoregressive distributed lag bounds testing approach. The findings of this study reveal strong relationship between the indicators of financial liberalization and economic growth in Nigeria. We find that very high levels of financial openness generally erode the growth-promoting role of financial development. From the policy perspective, there is an ardent need to stabilize the performance of financial system in Nigeria.
Highlights
The objective of financial deregulation is to improve the broad economic performance towards sustained economic development through increased competitive efficiency within the financial system thereby channelling resources to the real sector of the economy
This study aims at examining the relationship between financial liberalization and economic growth in Nigeria covering the period 1981–2013, and this will assist the policy makers on the nature of relationship between financial liberalization and economic growth in Nigeria
Financial liberalization is theoretically known to be an important driver of economic growth; the emergence of new industries, the availability of money in the circulation and how it affects prices, extent of international trade in the countries among others are necessities that any economy cannot survive without
Summary
The objective of financial deregulation is to improve the broad economic performance towards sustained economic development through increased competitive efficiency within the financial system thereby channelling resources to the real sector of the economy. Since the introduction of financial liberalization, Nigeria’s economy has failed to witness impressive results such as attraction of foreign investment and containing capital flight. Empirical evidence in Nigeria indicates that neither the domestic savings nor investment have increased remarkably since the introduction of the broad-based structural reform package. Needless to emphasize that since 1986, the banking industry has witnessed considerable structural changes coupled with attracting due attention from the banking public as well as the regulators and monetary authorities. Other factors are excessive competition which erodes franchise value [5], portfolio structure and composition and economic downturn, capital inadequacy
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