The Effect of Financial Liberalization on Selected Macroeconomic Variables: Lesson From Nigeria

This study analyzed the effect of financial liberalization on selected macroeconomic variables namely, Gross Domestic Product (GDP), foreign direct investment, financial deepening, savings and inflation rate in Nigeria. To carry out this analysis, we employed three alternate methods the parametric paired sample statistic for t-test and the non parametric Wilcoxon signed rank test to determine whether significant differences exists between pre/post liberalization macroeconomic variables. The third method, the discriminant analysis was meant to determine the direction as well as the magnitude of the discriminant variables. The result shows that while real GDP recorded (highest) positive and significant contribution, national savings and foreign direct investment made negative and significant contribution. Financial deepening and inflation rate did not discriminate significantly between non financial and financial liberalization. In the light of this, coupled with he theoretical evidence of bank crisis emanating from financial liberalization, the recommendation that government embarking on financial liberalization should set up an agency that will follow up action, was made.