Authors :
ILUGBUSI, Segun. B; AJALA, Rosemary B; AKINDEJOYE, John A; OGUNDELE, Abiodun
Volume/Issue :
Volume 5 - 2020, Issue 4 - April
Google Scholar :
https://goo.gl/DF9R4u
Scribd :
https://bit.ly/2z4Z3la
Abstract :
Several studies have emerged since the work
of McKinnon and Shaw (1973) on the relationship
between financial liberalization and economic growth.
However, there are still dearth of literature in respect to
the proxies employed for financial liberalization. As a
result, this study investigated the effect of financial
liberalization on economic growth in Nigeria covering a
period of 33years spanning 1986 to 2018. Adopting
McKinnon and Shaw hypothesis as the theoretical
framework, economic growth was represented by gross
domestic product (GDP), financial liberalization was
represented by prime lending rate, saving deposit rate,
exchange rate, credit to private sector and ratio of
private investment to GDP. Data were sourced from
CBN Statistical Bulletin and estimation done using auto
regressive distributed lag. The study found that,
financial liberalization has long and short run
relationship with economic growth. Further findings
also showed that prime lending rate had insignificant
positive and credit to private sector had significant
positive effects on economic growth. On the other hand,
savings deposit rate, exchange rate and ratio of private
investment to GDP have insignificant negative effects on
economic growth. The study concluded that, financial
liberalization has significant positive effect on economic
growth with overriding effect from credit to private
sector. Therefore, the study recommended among
others that, government through the Central Bank of
Nigeria should review the saving deposit rate upward in
order to encourage increase of domestic savings by
surplus sector of the economy. More importantly,
policies that will encourage private sector investment
should be looked into by government so as to further
stimulate economic growth in Nigeria.
Keywords :
Financial Liberalization, Economic Growth, Credit To Private Sector, Prime Lending Rate.
Several studies have emerged since the work
of McKinnon and Shaw (1973) on the relationship
between financial liberalization and economic growth.
However, there are still dearth of literature in respect to
the proxies employed for financial liberalization. As a
result, this study investigated the effect of financial
liberalization on economic growth in Nigeria covering a
period of 33years spanning 1986 to 2018. Adopting
McKinnon and Shaw hypothesis as the theoretical
framework, economic growth was represented by gross
domestic product (GDP), financial liberalization was
represented by prime lending rate, saving deposit rate,
exchange rate, credit to private sector and ratio of
private investment to GDP. Data were sourced from
CBN Statistical Bulletin and estimation done using auto
regressive distributed lag. The study found that,
financial liberalization has long and short run
relationship with economic growth. Further findings
also showed that prime lending rate had insignificant
positive and credit to private sector had significant
positive effects on economic growth. On the other hand,
savings deposit rate, exchange rate and ratio of private
investment to GDP have insignificant negative effects on
economic growth. The study concluded that, financial
liberalization has significant positive effect on economic
growth with overriding effect from credit to private
sector. Therefore, the study recommended among
others that, government through the Central Bank of
Nigeria should review the saving deposit rate upward in
order to encourage increase of domestic savings by
surplus sector of the economy. More importantly,
policies that will encourage private sector investment
should be looked into by government so as to further
stimulate economic growth in Nigeria.
Keywords :
Financial Liberalization, Economic Growth, Credit To Private Sector, Prime Lending Rate.
