Nexus Between Financial Liberalization, Balance Of Payment And Economic Growth In Nigeria

Danladi Jonathan Dastu (Afe Babalola University,Ado Ekiti,Ekiti State)
Faweya Kolapo Vincent (Afe Babalola University,Ado Ekiti,Ekiti State.)

Article ID: 1611



The objectives of this paper are to examine the nexus between financial liberalization, balance of payment and economic growth in Nigeria. The scope of this study due to data availability, especially on measures of balance of payment, covers the period of 1986-2017. This study adopts econometrics techniques of analysis by using Panel Unit Root Tests and Co-integration analysis which is used to determine the long run relationship among economic variables. To test the co-integration relationship this study followed the methodology proposed by Pedroni (1991) who extends the Engle and Granger (1987) two step procedure to heterogeneous panel data framework. The study adopts annual time series secondary data for the period of 1986 to 2017. Balance of payment, Official Exchange Rate, Inflation rate (%), Balance of trade, Trade openness, Real Gross Domestic Product growth, and Term of Trade, all data used were obtained from the World Development Indicators. The findings of this study revealed that an increase in exchange rate,interest rate, inflation rate, and trade openness have negatively affect economic growth. Hence, changes or movements in these variables do not necessarily prompt the liberalization decision in the real sector. Therefore, the need to address balance of payment is important, in accordance with the low rate of development in Nigeria. We therefore, recommend that government should monitor both Fiscal and Monetary policies’ variables that can significantly influence economic growth in Nigeria.That is, adequate balance of payment that can encourage appropriate financial liberalization should be put in place with, Official Exchange Rate, Inflation rate (%), Balance of trade, Trade openness.


Nigeria;Financial Liberalization; Balance of Payment; Economic Growth; Structural Adjustment Programme; Gross Domestic Product.

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