BANK LENDING, ENTREPRENEURSHIP AND ECONOMIC GROWTH IN NIGERIA

Abstract

Global economic downturns have shown that the performance of financial institutions is critical to economic growth. This paper examined the impact of bank lending on entrepreneurship and the real growth of the Nigerian economy, using annual time series data from 1991 to 2021. Granger causality tests and the two stage least square method of estimation were used for the analysis. The 
Granger causality test result showed that there was a bi-directional causality between bank lending and entrepreneurship in Nigeria. The results of the 2 stage least square regression analysis revealed that bank lending did not have significant impact on entrepreneurship in Nigeria but had significant impact on economic growth in Nigeria. Further analysis showed that bank lending did not have significant impact on interest rate but had significant impact on inflation rate in Nigeria. The study suggested that the Central Bank of Nigeria and the policy makers should periodically consider the optimality of the lending rate to place the lending rate at 
the optimal level. Periodic review of interest rate with respect to macroeconomic performance and entrepreneurship development will make funds affordable for entrepreneurs in Nigeria.