BANK CREDITS AND THE PERFORMANCE OF NIGERIA’S MANUFACTURING SUB-SECTOR

Abstract

This study examined bank credit and Nigeria manufacturing subsector performance nexus
using secondary data obtained from the Statistical Bulletin of Central Bank of Nigeria
(CBN) and National Bureau of Statistics (NBS) annual reports and publications. The
objectives of the paper are to: determine the effect of bank demand deposit on manufacturing
subsectors; ascertain the effect of bank lending rate to mass on manufacturing subsectors;
evaluate the effect of interest rate on manufacturing subsectors; examine the effect of
exchange rate on manufacturing subsectors; determine the effect of workers incentives on
manufacturing subsectors and ascertain the effect of employment generation on
manufacturing subsectors.
Ordinary Least Square techniques were applied after determining stationarity of the
variables using the ADF Statistic, as well as the cointegration of variables using the
Johansen approach. The study discovered that the variables are stationary and have a long
term relationship among the variables in the model. Bank demand deposit, bank lending
rate, bank interest rate, exchange rate, workers incentives and employment generation are
major determinants of manufacturing subsectors in Nigeria. The study recommends that:
cheap credit should be made available for manufacturing sector investment in Nigeria; this
will encourage more investors in the manufacturing sector to access adequate loan facilities
to enhance manufacturing sector output in the long run. The apex bank of Nigeria should
reduce bank. This important because it will make the loans less expensive for the
commercial banks, thus encouraging the public capacity to take credit and will gradually
increased the volume of credit demanded for investment in the manufacturing sector. The
government should engender a market force induced interest rate. This will enhance more
investment by channeling saving to productive investment and stimulate real output. The
need to stabilize the exchange rate is imperative because one unit increase in exchange rate
volatility leads to decline in manufacturing output growth.