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The Relative Impact of Bank Credit on Manufacturing Sector in Nigeria

Author

Listed:
  • Kalu Ebere Ume

    (University of Nigeria Nsukka, Nigeria,)

  • Alice Chinwe Obasikene

    (Department of Banking and Finance, Enugu State University of Science and Technology, Nigeria,)

  • Chioma Dorothy Oleka

    (Department of Banking and Finance, Enugu State University of Science and Technology, Enugu, Nigeria,)

  • Augustina Ogoma Nwadike

    (Department of Banking and Finance, University of Nigeria, Enugu Campus,)

  • Chinwe Okoyeuzu

    (Department of Banking and Finance, University of Nigeria, Enugu Campus Nigeria)

Abstract

This study examined the relative impact of Bank credit on the manufacturing sector in Nigeria' 1986-2013. The major objective was to investigate the extent of impact of bank credit on the output of the manufacturing sector in Nigeria. The study adopted the autoregressive distributed lag (ARDL) bound cointegration test approach and error correction representations. Focusing on the short run relationship, we found every explanatory variable and their following lags as significant functions of volume of output of the manufacturing sector at 5% except exchange rate and its lags. In the bound test following the ARDL, we found evidence in favor of cointegration among the variables regardless of whether they are stationary or not given that the observed test statistic exceeds the upper critical band. Our results imply the presence of co integrating vectors of long run equilibrium relationships among the variables of interest. This result is corroborated by the Dynamic ordinary least squares results as well as the long run estimates of the ARDL. Overwhelmingly, we found evidence of a certain return to the long-run equilibrium in the model. The error correction term is negative and statistically significant. The negative value shows that there exists an adjustment speed from short-run disequilibrium towards the long-run equilibrium. By this, there is an indication that it takes about 3 years to restore the long-run equilibrium state on the Output of the manufacturing should there be any shock from the explanatory variables. By way of policy recommendation or positioning, the Central Bank and other monetary authorities alike should make policy that will lead to increase in VBC to the manufacturing sector. As this will play a catalytic role for growth in the sector in particular and the economy in general.

Suggested Citation

  • Kalu Ebere Ume & Alice Chinwe Obasikene & Chioma Dorothy Oleka & Augustina Ogoma Nwadike & Chinwe Okoyeuzu, 2017. "The Relative Impact of Bank Credit on Manufacturing Sector in Nigeria," International Journal of Economics and Financial Issues, Econjournals, vol. 7(2), pages 196-201.
    • Handle: RePEc:eco:journ1:2017-02-26
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    References listed on IDEAS

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    1. Zivot, Eric & Andrews, Donald W K, 2002. "Further Evidence on the Great Crash, the Oil-Price Shock, and the Unit-Root Hypothesis," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(1), pages 25-44, January.
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    3. Pierre Perron, 1994. "Trend, Unit Root and Structural Change in Macroeconomic Time Series," Palgrave Macmillan Books, in: B. Bhaskara Rao (ed.), Cointegration, chapter 4, pages 113-146, Palgrave Macmillan.
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    Cited by:

    1. Sami Al-Kharusi & Azmat Gani, 2022. "Financial Credit and Expansion of the Non-Hydrocarbon Sector in Gulf Cooperation Council Countries," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 28(3), pages 105-118, November.
    2. Eunice Jonathan Lugina & Adam Beni Swebe Mwakalobo & Francis Lwesya, 2022. "Effects of industrialization on Tanzania’s economic growth: a case of manufacturing sector," Future Business Journal, Springer, vol. 8(1), pages 1-11, December.
    3. Hacievliyagil Nuri & Eksi Ibrahim Halil, 2019. "A Micro Based Study on Bank Credit and Economic Growth: Manufacturing Sub-Sectors Analysis," South East European Journal of Economics and Business, Sciendo, vol. 14(1), pages 72-91, June.

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    More about this item

    Keywords

    Manufacturing Sector; Volume of Bank Credit; Nigeria; Autoregressive Distributed Lag Model; Bound Test;
    All these keywords.

    JEL classification:

    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • L6 - Industrial Organization - - Industry Studies: Manufacturing

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