Financial Sector Development and Nigeria’s Performance in the Global System

Abstract

Financial sector development and Nigeria’s performance in the global economy has been the focus of the paper. With data covering the period between 1980 and 2010, using the Ordinary Least Square (OLS) cointegration techniques with its implied Error Correction Mechanism (ECM), the study reveals from the cointegration test results that a long run relationship exists among the variables. The parsimonions ECM results in the study showed the increasing global relevance of liquidity ratio, money supply, bank loans and interest rate in financial sector development policy making in Nigeria. Thus the result indicates that a high interest rate is detrimental to the development process in Nigeria. The cointegration test showed a long run relationship among the variables. Policies to reduce the interest rate and increase the liquidity ratio in Nigeria are therefore recommended.