Is liberalizing finance the game in town for Nigeria ?

Stemming from the McKinnon-Shaw’s advocacy for financial liberalization in “less-developed countries” and its attendant unresolved intellectual gymnastics, the authors primarily attempt to model the relationship between; financial liberalisation and economic growth on the one hand and financial liberalisation and investment on the other. With an array of rich variable mix, necessary variable interaction terms, and improvement on some past researches whilst inculcating the Autoregressive Distributed Lag (ARDL) methodology, the study establishes the long-run and short-run relationship between financial liberalisation, investment and growth in a time series framework. Secondarily, Granger causality is also employed to determine the direction of causality between financial development and economic growth. The results obtained suggest that there is a positive long-run equilibrium relationship between financial liberalisation; investment and growth. The study also finds a causal relationship between financial development and economic growth in Nigeria. This might mean that the financial liberalisation process in Nigeria has stimulated financial development leading to significant contribution to economic growth. The results might lay credence to the view that financial development plays a crucial role in the process of economic development, as such, reducing government inefficiencies might be a choice policy in freeing resources for the development of financial institutions