Nexus Between Financial Liberalization and Economic Growth in Nigeria (1987-2022)

Abstract:

This study examines the influence of banking sector liberalization on economic growth (GDP) in Nigeria by employing the Ordinary Least Square (OLS) approach. Findings from the study show a positive association between the measurement of financial deepening (FD); which implies that greater financial liberalization (FLB) aligns with GDP. A more robust domestic currency results in diminished GDP. The result further indicates a positive correlation between FDM and GDP signifying that a unit increase in FDM results in a 0.012070 unit increase in GDP, a unit increase in exchange rate (EXR), leads to a decrease of 4,705.546 unit in GDP and a unit increase in inflation (INF) leads to 5,428.744 unit increase in GDP. Therefore, the study recommends that it is essential to maintain a balanced approach to EXR management and policies should aim for stability to support GDP while considering the impact on international trade competitiveness.