Bank Credit and Growth of Manufacturing Sector in Nigeria

Abstract

The study investigated Deposit Money Banks Credit and Growth of Manufacturing Sector in Nigeria from 2005-2019.  To achieve this objective, the study adopted a survey research design and data were gathered through secondary sources. The secondary data were variously collected from central Bank of Nigeria (CBN) annual report on various issues, National Bureau of Statistics (NBS), Nigerian Deposit Insurance Corporation (NDIC) annual report and Manufacturers Association of Nigeria (MAN)annual bulletin on Gross Domestic product (RGDP), Broad money supply(M₂), Lending interest rate (LIR) and Exchange rate(EXR). Data gathered were tested for co-integration using Augmented Dickey-fuller (ADF) and vector error correction model (VECM) techniques. Multiple linear regressions were used to test the hypotheses formulated for the study. The data analyzed shows that there is a significant positive relationship between Deposit Money Banks Credit and Growth of Manufacturing sector in Nigeria.  On the basis of the findings, the study recommends that the monetary authority should take a deliberate effort to fashion out lending interest rate that will make credit from the Deposit Money Banks affordable to economic agents in the manufacturing subsector. The current situation where return on investment in the subsector is less than the lending interest rate discourages investors in the manufacturing subsector from borrowing funds for the development of the subsector, the study concludes.