Assessing the Impact of Financial Policies on Nigeria's Economic Growth

Abstract

The period 1981 to 2009 witnessed various financial developments meant to attract foreign capital inflows, promote the stability of the financial sector and to enhance the growth of the Nigerian economy. A review of extant literature on economic growth suggests positive relationships between financial activities and economic growth. Thus, this study sought to determine the extent to which the Nigerian economy has been impacted by financial developments arising mainly from the various financial policy measures in recent years. The aim was to assess the impact of financial policy measures on the growth of the national economy. This study covered the period 1981 to 2009. Using gross domestic product GDP as a proxy for economic growth and some financial variables as indicators of financial policy measures, it used the ordinary least square (OLS) estimation technique, Engle and Granger (1987) two-stage technique and the Granger causality tests to process a time series data set of 29-year range. The results show, in general, that financial policies have not significantly impacted economic growth in Nigeria. The study recommends, amongst others, some guided regulation of financial liberalization to ensure that the economy not only grows but develops to improve the wellbeing of the citizens. Furthermore, it calls for effective implementation and monitoring of financial policies as well as adequate supervision of the financial sector by the relevant authorities to avoid lopsided compliance with financial and monetary guidelines.

Keywords: Financial policies, Financial Liberalization, Financial developments, Economic growth, Guided regulations

International Journal of Development and Management Review (INJODEMAR) Vol. 7 June, 2012