Impact of Financial Liberalization on Private Investment: Empirical Evidence from Nigerian Data

Anthony Orji, God'stime Osekhebhen Eigbiremolen () and Jonathan Emenike Ogbuabor ()
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God'stime Osekhebhen Eigbiremolen: Department of Economics, University of Nigeria, NIGERIA
Jonathan Emenike Ogbuabor: Department of Economics, University of Nigeria, NIGERIA

Review of Economics & Finance, 2014, vol. 4, 77-86

Abstract: This study examines the nature of the relationship between financial liberalization and private investment in Nigeria from 1970 to 2012. The regression analysis reveals that financial liberalization, proxied by real interest rate (RINTR) has a statistically significant positive impact on private investment. Furthermore, the Chow-test result shows that there was a structural break between financial liberalization and private investment in Nigeria within the period under review. This change in relationship can be attributed to the Structural Adjustment Programme (SAP) embarked upon by the Nigerian government in 1986 which liberated the financial sector from acute repression. In addition, the Granger causality test shows that although there was dependence between financial liberalization and private investment, none caused the other. This study therefore concludes that private investment which is enhanced by private savings, financial liberalization and other key variables, is fundamental in the achievement of sustainable economic growth and development. The study therefore recommends that government should create enabling environment for private investment to thrive.

Keywords: Financial liberalization; Private investment; Granger causality; Chow test; Nigeria (search for similar items in EconPapers)
JEL-codes: E22 E44 G21 O16 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (6)

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