| Abstract: | Employing the Autoregressive Distributed Lag (ARDL)-Bounds testing approach, and using GDP – excluding the contributions from oil and gas, as well as the financial services sector – as the growth indicator between 1969 and 2008, the paper establishes a long-run relationship between economic growth and financial liberalisation, which is represented by an index. This index is calculated by using Principal Component Analysis (PCA). The paper finds that financial liberalisation policies have a positive and significant effect on economic growth in Nigeria – both in the short run and in the long run. The study, therefore, recommends that appropriate financial liberalisation policies should be pursued in Nigeria, in order to foster economic growth. However, considering the fact that financial markets are prone to market failures, the study cautions against adopting a laissez-faire approach to financial reforms. |
