Effect of Financial Liberalization on the Performance of Informal Capital Market

Abstract

This study examines the effects of financial liberalization on the corporate performance of informal capital market in Nigeria {Unity (IFE) NUT Cooperative Investment and Credit Society as a case study}. It employs the Ordinary Least Square method of multiple regression analysis for the period of ten years (2001-2010). Three models were formulated, the first, proxied financial liberalization variable (saving rate) with loan granted by informal capital market in Nigeria and saving mobilized by the market. The second, revealing a relationship between financial liberalization variable (lending rate) with deposit mobilised by informal capital market in Nigeria and loan granted by the market while the last, depicting relationship between financial liberalization variables (saving and lending rates), deposit mobilised with loan granted by informal capital market in Nigeria and net surplus of the market (being non-profit making institutions). This work concluded that financial liberalization has significant effect on deposit mobilised and loan granted by the market but did not have significant effect on their net surplus. It therefore, recommends that the market should be supervised, formulate policies that would enhance the performance of informal financial sector in Nigeria coupled with the reduction of the gap between lending and saving rates of banks.

Keywords: Financial Liberalization, Informal Capital Market, Unity (IFE) NUT Cooperative Investment and Credit Society, Ordinary Least Square (OLS) Method