Financial Liberalization and Rural Financial Landscape: Study of Nigeria

Abstract

The study aims at evaluating the impact of financial sector liberalization on the financial landscape of rural Nigeria represented by resource mobilization and allocation using time series data from 1981 to 2014. The study was motivated by the high level of financial exclusion in the rural area and the search for solution to this problem. The study adopted Autoregressive Distributed Lag (ARDL) model as the preferred method of analyzing the data. It was that found financial liberalization had significant impact on the rural financial landscape. Specifically, the study found that increase in number of bank branches in the rural areas insignificantly improved resource mobilization but had significant positive effect on allocation. It was also found that lending rates significantly encourages resource allocation while deposit rates also encourage resource mobilization, though insignificantly. On the basis of these findings, the study recommends that financial liberalization should be continued in Nigeria especially through increase in number of bank branches in rural areas. Banks should also be encouraged to maintain competitive interest rates.