IIARD International Institute of Academic Research and Development

IIARD International Journal of Economics and Business Management (IJEBM )

E-ISSN 2489-0065
P-ISSN 2695-186X
VOL. 3 NO. 5 2017

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Financial System Liberalization, Savings, Investment and Economic Growth in Nigeria

Odili Okwuchukwu, Ph.D & Florence O. Ariwa

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Abstract

This study examines the impact of financial system liberalization, Savings and Investment on the economy of Nigeria. The selected indicators of financial liberalization used are ratio of liquid liabilities to GDP (M2GDP) and real interest rate (INT). Other explanatory variables of interest are savings (SAV) and investment (INV). Time series data from 1970 to 2014 was employed in the estimation of variables after ensuring that the data series was stationary using the Augmented Dickey Fuller unit root test (ADF). This was followed by Johansen co- integration test for the existence of long run relationship. Thereafter the long and short run relationship between the dependent and independent variables were estimated. The results of the estimation revealed that the explanatory variables were able to influence the growth process positively and significantly in the economy of Nigeria except interest rate which had negative impact and the dummy variable that was not significant. To this effect it was recommended that monetary policies should be geared towards increasing the level of money supply to enhance savings and investment. Furthermore, for financial system liberalization to yield result in Nigeria there is need to lower the lending interest rate to ensure that potential borrowers’ costs is reduced and return on investment increased

keywords:

Financial System, Liberalization, Savings, Investment, Growth

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