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Periodical article Periodical article Leiden University catalogue Leiden University catalogue WorldCat catalogue WorldCat
Title:Shifting Fortunes: The Political Economy of Financial Liberalization in Nigeria
Authors:Lewis, Peter M.ISNI
Stein, HowardISNI
Periodical:World Development
Geographic term:Nigeria
economic policy
Politics and Government
Economics and Trade
External link:https://doi.org/10.1016/S0305-750X(96)00085-X
Abstract:On the recommendation of the World Bank, Nigeria began to liberalize its financial sector in 1986. Contrary to the prediction of financial repression theory, savings and investment declined in the wake of banking deregulation. By 1995, the Nigerian financial system was in a state of collapse. The paper locates the main failure of Nigeria's financial deregulation in the political and institutional setting of reform. The institutional mechanisms needed to supervise and regulate banking under the new system were absent while private sector banking capacities were weak. Moreover, financial liberalization was quickly captured by a clientalist State as a means of reallocating rents to strategic constituents. An additional precipitating factor was macroeconomic instability. This paper begins with a brief account of the events leading up to financial liberalization. Next, it examines the changing locus of rents in the process of economic reform; changes in the structure of the financial sector; regulatory reform and evasion; the course of economic policy and the sources of macroeconomic instability; the array of scams and legerdemain prevalent throughout the financial sector; and the impact of financial liberalization on real sector activity. Alternative approaches to reform are discussed in conclusion. Bibliogr., notes, ref., sum.