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

Author

Listed:
  • Anthony Orji

    (Department of Economics, University of Nigeria, NIGERIA)

  • God'stime Osekhebhen Eigbiremolen

    (Department of Economics, University of Nigeria, NIGERIA)

  • Jonathan Emenike Ogbuabor

    (Department of Economics, University of Nigeria, NIGERIA)

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.

Suggested Citation

  • Anthony Orji & God'stime Osekhebhen Eigbiremolen & Jonathan Emenike Ogbuabor, 2014. "Impact of Financial Liberalization on Private Investment: Empirical Evidence from Nigerian Data," Review of Economics & Finance, Better Advances Press, Canada, vol. 4, pages 77-86, May.
    • Handle: RePEc:bap:journl:140206
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    References listed on IDEAS

    as
    1. Galindo, Arturo & Schiantarelli, Fabio & Weiss, Andrew, 2007. "Does financial liberalization improve the allocation of investment?: Micro-evidence from developing countries," Journal of Development Economics, Elsevier, vol. 83(2), pages 562-587, July.
    2. Tomola M. Obamuyi & Sola Olorunfemi, 2011. "Financial reforms, interest rate behaviour and economic growth in Nigeria," Journal of Applied Finance & Banking, SCIENPRESS Ltd, vol. 1(4), pages 1-2.
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    4. Babajide Fowowe, 2011. "Financial Sector Reforms And Private Investment In Sub-Saharan African Countries," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 36(3), pages 79-97, September.
    5. Lahcen ACHY, 2004. "Financial liberalization, saving, investment and growth in MENA countries," Finance 0411004, University Library of Munich, Germany.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

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    2. Clement Moyo & Pierre Le Roux, 2019. "Interest Rate Reforms and Economic Growth in SADC Countries: The Savings and Investment Channel," Scientific Annals of Economics and Business (continues Analele Stiintifice), Alexandru Ioan Cuza University, Faculty of Economics and Business Administration, vol. 66(4), pages 507-523, December.
    3. Amassoma Ditimi & Azeez Oluwatobiloba, 2020. "Capital Inflows, Financial Deepening And Economic Growth Nexus: The Missing Link," Economic Review: Journal of Economics and Business, University of Tuzla, Faculty of Economics, vol. 18(1), pages 61-73, May.
    4. Moyo, Clement & Le Roux, Pierre, 2018. "Interest rate reforms and economic growth: the savings and investment channel," MPRA Paper 85297, University Library of Munich, Germany.
    5. repec:eco:journ1:2014-03-23 is not listed on IDEAS
    6. Faris Alshubiri, 2022. "The Impact of the Real Interest Rate, the Exchange Rate and Political Stability on Foreign Direct Investment Inflows: A Comparative Analysis of G7 and GCC Countries," Asia-Pacific Financial Markets, Springer;Japanese Association of Financial Economics and Engineering, vol. 29(3), pages 569-603, September.

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    More about this item

    Keywords

    Financial liberalization; Private investment; Granger causality; Chow test; Nigeria;
    All these keywords.

    JEL classification:

    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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