THE ROLE OF FINANCIAL LIBERALIZATION IN NIGERIA: A REVIEW OF KEY POLICY ISSUES

This paper examines the role of financial liberalization policies in Nigeria. The study incorporates the role of both interest rate liberalization and capital account liberalization in a stylized fashion. The study finds that financial liberalization policies on the whole have had positive effects in Nigeria. Following the liberalization of the financial sector in Nigeria, there has been a general increase in financial saving. Likewise, financial deepening as measured by the ratio of money and quasi money (M2) to gross domestic product (GDP) also shows a general increase following the liberalization of the financial sector in Nigeria. However, the study has also brought to light some of the weaknesses of the financial liberalization hypothesis. For example, the policy overlooks the issue of foreign currency deposits in the domestic banks and the monetary policies associated with such deposits. However, recognizing these draw-backs does not make the hypothesis deficient in any way.