Employing time series data from 1970 to 2009, sourced from the Central Bank Statistical Records, on an Autoregressive Distributed Lag (ARDL)-Bound Test Model to test for the long and short run impact of financial deregulation and the possibility of credit crunch towards the real sector, our results interestingly reveals that deregulating the Nigerian financial system had an adverse boomerang effect on the credits allocated to the real sectors in the long run, and in the short run, financial liberalization was in all insignificant and negative. On investigating the presence of credit crunch in the long and short run, our results leads us to the conclusion that Deposit Money Banks (DMBs) in Nigeria have a strong discriminating credit behaviour towards the real sectors (Agriculture, Manufacturing) and the SMEs, as credit crunch is present in these sectors, in both the short and long run indicative by the inverse relationship between increasing deposit liabilities that makes up savings and the credit that flows to these sectors. Suggesting that credit crunch does exist in Nigeria, when the focus is narrowed down to vital sectorial level that can save the economy and not shallow aggregates that deceives us, to thing all is well. Key Word: Financial Liberalization, Credit to Private Sector Components, ARDL-Bound Test, Credit Crunch