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Commercial Bank Credit Flow And Economic Growth In Nigeria

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The shortage of financial capital is a common challenge in most developing countries. It is one of the conditions causing growing inequality and worsening poverty level. The failure of financial institutions, most especially money deposit banks (MDB), to discharge the major role of mobilizing saving for investment has created imbalances between the real and money sector of the economy. Despite many banking reforms in Nigeria, banks are still not performing up to expectation because there are still many unresolved problems in the financial sector. The role of banks in ensuring proper flow of money from surplus and idle zone to deficit and useful spot cannot be overemphasized. This study examined the nexus of commercial bank credit flow and economic growth by controlling of money supply, domestic investment, inflation, and interest rate in the economy. The study was based on time series data covering the period 1981–2019. Data were sourced from the recent e-editions of Statistical Bulletin of the Central Bank of Nigeria and National Bureau of Statistics. The study applied econometric techniques such as unit root test, Hansen and ARDL Bound testing for cointegration, FMOLS and Toda-Yamamoto Granger non-causality test to achieve the stated objective. The result showed that Commercial bank credit flow, among other variables, has positive and significant influence on economic growth. The result also showed that there is one-way causal evidence between credit flow and growth. The study recommends that Nigerian banks should rise to the occasion by ensuring regular flow of loanable funds to the real sector to aid both short term and long term investment activities for speedy economic progress. The study therefore concluded that there is cause-effect relationship between commercial bank credit flow and economic growth in Nigeria.

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  • A. Dada, Matthew & M. A.Posu, Sunday & N.Raheem, Abiodun & D. Owoeye, Segun & A.Oguntegbe, Abraham, 2021. "Commercial Bank Credit Flow And Economic Growth In Nigeria," Ilorin Journal of Business and Social Sciences, Faculty of Social Sciences, University of Ilorin, vol. 23(2), pages 102-121, October.
    • Handle: RePEc:ris:ilojbs:0083
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