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IMPACT OF ECONOMIC LIBERALIZATION ON THE GROWTH OF THE NIGERIAN ECONOMY (1986-2015)
ABSTRACT
With the introduction of a major economic reform initiative in 1986 under the Structural Adjustment Programme (SAP), the Nigerian government sought to accelerate economic growth through elimination of price distortions, promotion of competition, and making the economy more market-oriented. To achieve these objectives, the government deregulated the mechanism for management of interest and exchange rates, liberalized the conditionalities for entry into banking business and dismantled external trade barriers. Following the sub-optimal performance of the Nigerian economy, opinions were divided on whether liberalization has aided or retarded economic growth in Nigeria. This study therefore seeks to examine the nexus between economic liberalization and economic growth in Nigeria. Specifically, the study examined the extent to which changes in major economic fundamentals like exchange rate, lending rate, inflation rate, financial deepening, trade openness and saving rate affected economic growth in Nigeria. Annual data on the variables, sourced from the publications of the Central Bank of Nigeria and National Bureau of Statistics were analyzed using the econometric technique of the ordinary least square. The study produced mixed results. For instance, there was evidence of significant positive impact of financial liberalization on the growth of the real economy. Exchange rate was however shown to have non-significant effect on economic growth. Trade liberalization had non-significant positive impact on output growth in Nigeria. Finally, the result showed significant negative effect of inflation rate on economic growth.The study concluded that economic liberalization has significant impact on the growth of the Nigerian economy. The work recommended that financial deepening programme should be strengthen through consolidation of the financial liberalization programme of the Federal Government of Nigeria; and that the government should apply substantial amount of government revenue to infrastructural development with a view of reducing the cost of productions and price levels.
KEYWORDS: Trade liberalization, Trade openness, Economic growth