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Bank Credit and Growth of the Manufacturing Sector Nexus in Nigeria: An ARDL Approach

Author

Listed:
  • Michael S. Ogunmuyiwa

    (Olabisi Onabanjo Univiversity)

  • Babatunde A. Okuneye

    (Olabisi Onabanjo Univiversity)

  • Joseph N. Amaefule

    (Babcock University)

Abstract

Bank loans and credits play a significant role in the development of the manufacturing sector of any country. Most manufacturing concerns in developing countries with particular reference to Nigeria heavily depend on bank loans to nurture their businesses to the next level. Sequel to this, the paper examines the impact of bank credit on growth of the manufacturing sector in Nigeria. Time series data from the return to democratic rule in 1999 to 2014 were fitted into the regression model using econometric techniques particularly the Augmented Dickey-Fuller (ADF) test and the Autoregressive Distributed Lag (ARDL) model. Empirical findings show that bank credit to the private sector has a positive impact on the manufacturing sector. Albeit, a significant impact was found between bank credit and manufacturing sector’s growth, the policy implication of this finding is that bank credits drive manufacturing output in Nigeria. Hence, monetary policy instruments should still be targeted towards allocating more credits to the private sector in order to fully achieve the desired objectives of boosting the output of the sector as well as providing a lead way for the attainment of the desired economic growth and development.

Suggested Citation

  • Michael S. Ogunmuyiwa & Babatunde A. Okuneye & Joseph N. Amaefule, 2017. "Bank Credit and Growth of the Manufacturing Sector Nexus in Nigeria: An ARDL Approach," EuroEconomica, Danubius University of Galati, issue 2(36), pages 62-72, November.
    • Handle: RePEc:dug:journl:y:2017:i:2:p:62-72
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    References listed on IDEAS

    as
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    3. Chang, Philip C. & Jia, Chunxin & Wang, Zhicheng, 2010. "Bank fund reallocation and economic growth: Evidence from China," Journal of Banking & Finance, Elsevier, vol. 34(11), pages 2753-2766, November.
    4. Hsin-Yu Liang & Alan Reichert, 2007. "Economic Growth And Financial Sector Development," The International Journal of Business and Finance Research, The Institute for Business and Finance Research, vol. 1(1), pages 68-78.
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