Financial Globalisation and Financial Sector Development in Nigeria

This study explores how financial globalization affects Nigeria's financial sector development over time (1981–2020). Despite policy reforms, Nigeria’s financial sector underperforms due to low financial globalization, resulting in weak money and capital market development. The study aimed to examine the effect of financial globalization on Nigeria’s financial sector development with specific objectives to: (i) Examine the trend of financial globalization in Nigeria (ii ) Examine the development trend of money and capital markets (iii) Assess the impact of financial globalization on money market development (iv) Assess the impact of financial globalization on capital market development. The study adopted an ex-post facto research design. Secondary data were sourced from the World Bank and Global Financial Development Database (1981– 2020). The sample covered Nigeria over 43 years. ARDL model was used for analysis, including unit root and cointegration tests. Dependent variables were money and capital market development; key independent variable was financial globalization index. The findings revealed that Financial globalization had a significant positive effect on money market development (R² = 0.815, β = 0.3496, t = 6.085, p < 0.01), indicating strong long-run influence while Financial globalization positively influenced capital market development (R² = 0.795, β = 0.1738, t = 3.117, p = 0.0038), confirming significant long-run impact and Population growth and trade openness have no significant relationship with money and capital market development, both were significant in the long run for money market development (Population: β = 37.88, t = 2.419; Trade Openness: β = 0.166, t = 2.151). There is a significant positive correlation between financial globalization and financial sector development indicators in Nigeria (r = 0.144–0.349). The study concluded that financial globalization significantly enhances both the money and capital markets in Nigeria, implying its pivotal role in sectoral development and economic stability. Therefore, it recommended that Policymakers should strengthen financial globalization through liberalization reforms and institutional improvements to boost sector growth and integration.