IMPACT OF BANKING SECTOR CREDITS ON ECONOMIC GROWTH IN NIGERIA (1991-2022)

Abstract

This study investigated the impact of Banking Sector Credits on Economic Growth in Nigeria.
This study employed the ex-post fact research design. Secondary data was obtained from
Central Bank of Nigeria Statistical Bulletin between 1991 to 2022. The data obtained were
Credit to Private sector, Credit to Public Sector, Total Credit to the Economy, Broad Money
Supply and Prime Lending Rate as well as the Real Gross Domestic Product. Series of statistical
tests such pre-estimation test (descriptive test, normality test and stationarity test), standard
econometric tests (Long-Run and Short-Run regression tests, correlation test as well as granger
causality test) and post-estimation tests (such as Multicollinearity test, Serial Correlation LM
Test and Heteroskedasticity Test) were performed on the data. The results of the inferential tests
were used to validate the formulated hypotheses. Thus, four empirical results emerged; first, it
was found-out that Private Sector Credits and Public Sector Credits have positive but
insignificant impact on the economic growth. Secondly, there is a strong positive correlation
between private and public sector credits and lastly, there is bi-directional causality between
bank credits and economic growth. Thus, this study concluded that bank credits have not
significant impacted on the Nigerian economic growth. Thus, it recommended among others
that the government should minimize its borrowings from banks so as to allow the private
individuals with productive objectives access credits. It is also recommended that the monetary
authorities should endeavour to increase the credits in the economy, so as to allow improved
provision of loanable funds available and accessible to the investing public.