Impact Of Financial Deregulation On The Manufacturing Sector In Nigeria: 1981-2016 An Ardl Approach

Authors: Awe Emmanuel Omoniyi Ph.D; Muhammad Ali; Eze, MillicentAdanne Ph.D
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There has been shift from state-dominated development paradigm towards a more market determined strategy of development in the recent years. In view of this, empirical works have been conducted to examine the impact of financial deregulation on the economy. However, the existing studies focused aggregate output and overlooking sectoral impact. This paper therefore, further contributes to the empirical literature on financial markets and the Nigerian economy as it provides sector specific results concerning the impact of Nigeria‘s financial system deregulation on the economy with focus on the manufacturing sector using time series data from 1981-2016 and employing ARDL cointegration technique. It was found that financial deregulation does not significantly influence manufacturing output and credit tothe sector which points to the underdeveloped nature of the financial system. It was suggested that there is need for the development of the system through mobilization of more savings from the public and linking resources from the informal or traditionalfinancial sector to the banking system. This is expected to increase broad money supply (M2) as a percentage of GDP, reduce interest rate, and increase access to funds and investment in the manufacturing sector. Also, it is further suggested that interestrate and exchange rate should be moderately regulated downwards to a more inclusive competitive level that would facilitate access to funds and foreign currencies in the banking system by manufacturing firms, and enhance investment in the sector.