Political risk and financial development in Nigeria: Can credit buy social peace?

Mohamed Sahbi Nakhli and Brahim Gaies

The Quarterly Review of Economics and Finance, 2021, vol. 82, issue C, 55-62

Abstract: This study provides a first attempt to analyze the role of credit in the political stability of developing countries. By examining the case of Nigeria using annual data over the period 1984–2017 and the non-linear ARDL (NARDL) approach, we find that credit supply shocks have a significant and non-linear impact on short- and long-term political risk. In terms of asymmetry, we show that positive shocks have a positive and more pronounced impact than negative shocks in the short run, proving that credit expansion can be effective in terms of short-term political stability. In the long run, positive credit shocks increase political risk while negative shocks decrease it. These results suggest that an improvement in Nigeria’s prudential requirements for credit supply could be more effective for political stability than an easing of credit in the long run. In addition, better management of oil revenues, particularly through effective sterilization policies, is essential to prevent oil price fluctuations from leading to a highly pro-cyclical supply of credit, which threatens long-term political stability.

Keywords: Political institutions; Financial resource curse; Non-linear ARDL approach; Financial globalization; Political instability; Financial development (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1062976921001277
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:quaeco:v:82:y:2021:i:c:p:55-62

DOI: 10.1016/j.qref.2021.07.004

Access Statistics for this article

The Quarterly Review of Economics and Finance is currently edited by R. J. Arnould and J. E. Finnerty

More articles in The Quarterly Review of Economics and Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().