FINANCIAL SECTOR LIBERALIZATION ON THE ECONOMIC GROWTH IN NIGERIA

This study investigates the impact of financial sector liberalization on economic growth in Nigeria, with a focus on credit to the private sector and money supply. Financial liberalization, which includes reforms such as deregulating interest rates and increasing financial openness, has been a key policy direction for Nigeria since the introduction of the Structural Adjustment Program (SAP) in 1986. Despite these efforts, the relationship between financial sector reforms and sustainable economic growth remains complex and unclear. Using a multiple regression analysis, this study examines the long-term effects of key variables such as credit to the private sector, money supply, gross fixed capital formation, and trade openness on Nigeria’s real GDP. The findings reveal a significant positive relationship between money supply and real GDP, while credit to the private sector shows a weak or insignificant effect on economic growth. These results suggest that while financial liberalization has enhanced liquidity in the economy, challenges remain in effectively channeling credit to stimulate broader economic development. The study concludes that targeted policies are necessary to improve access to credit for small and medium-sized enterprises and ensure that financial reforms translate into tangible growth. It offers key recommendations for policymakers, including strengthening regulatory frameworks, improving financial inclusion, and addressing structural weaknesses in the financial system. This research contributes to the ongoing discourse on financial sector liberalization in Nigeria and its role in promoting long-term economic growth.