A. C. Nkemakolam


The study assesses the impact of bank liquidity reform on the economy of Nigeria with annual time series data from 1986 to 2013. There are mixed and conflicting conclusions indicating that the effect of bank liquidity reforms on economic growth has not yet been resolved. Thus, there is the need to further examine the effect of liquidity on the economic growth of Nigeria. The present study improves on the previous ones by restricting the data to the period stated. Based on the theoretical issues discussed and the literature surveyed the model is built around the augmented Solow growth model whose operational framework is the Lobb-Douglas production function. Econometric evidence reveals stationarity of the variables at their first differences while the Johansen co-integration approach also confirms the presences of one co-integrating relationship at one percent and five percent levels of significance. The study further shows that bank liquidity rate reforms have proven to have very high explanatory influence on Nigerian economy, which indicates that bank liquidity reform is a veritable tool for repositioning and reorienting Nigerian economy. Based on the findings and conclusions, the study recommend that the central bank of Nigeria and other relevant regulators must insist that banks maintain sound and stable liquidity ratios in order to promote sound financial system and enhance potentials of economic growth of Nigeria.


Liquidity, banking sector reforms, economic growth, monetary policy, Nigeria

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