Financial Liberalization and Some Selected Macroeconomic Variables in Nigeria

Abstract

The aim of the study was to determine the impact of financial liberalization on some selected macroeconomic variables in the Nigerian economy. The specific objectives were to: examine the impact of interest rate and exchange rate liberalization on investment in Nigeria, assess the impact of interest rate and exchange rate liberalization on savings in Nigeria, analyze the impact of interest rate and exchange rate liberalization on inflation in Nigeria, evaluate the impact of interest rate and exchange rate liberalization on financial depth in Nigeria and determine the impact of interest rate and exchange rate liberalization on Gross Domestic Product (GDP) in Nigeria. The ex-post facto research design was adopted to enable the researcher make use of secondary data to determine the cause-effect relationship of financial liberalization on the selected macroeconomic variables. The data were sourced from the Central Bank of Nigeria Statistical Bulletin and Federal Bureau of Statistics. The study covered a period of thirty-one years, 1986 to 2016. The study conducted the stationarity test to guarantee a non-spurious result, the co-integration test to capture the equilibrium long-run relationship between the variables and employed the error correction mechanism to reconcile the short-run behaviour of the chosen variables with its long-run behaviour. Tests were conducted to clearly ascertain the causality between financial liberalization and the selected macroeconomic variables. The data were tested and analyzed at 5% level of significance. The study found that Interest rate liberalization had negative and significant impact on investment while exchange rate liberalization had positive and significant impact on investment in Nigeria, Interest rate and exchange rate liberalization had negative and significant impact on savings in Nigeria, Interest rate liberalization had negative and significant impact on inflation while exchange rate liberalization had p

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