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This study examines the nature of the relationship between financial liberalization and
private investment in Nigeria from 1970 to 2012. The regression analysis reveals that financial
liberalization, proxied by real interest rate (RINTR) has a statistically significant positive impact on
private investment. Furthermore, the Chow-test result shows that there was a structural break
between financial liberalization and private investment in Nigeria within the period under review.
This change in relationship can be attributed to the Structural Adjustment Programme (SAP)
embarked upon by the Nigerian government in 1986 which liberated the financial sector from acute
repression. In addition, the Granger causality test shows that although there was dependence
between financial liberalization and private investment, none caused the other. This study therefore
concludes that private investment which is enhanced by private savings, financial liberalization and
other key variables, is fundamental in the achievement of sustainable economic growth and
development. The study therefore recommends that government should create enabling
environment for private investment to thrive.
