ANY CONNECTION BETWEEN BANK CREDIT AND ECONOMIC GROWTH IN NIGERIA? AN EMPIRICAL RESPONSE

Abstract

Money market is a component of the financial system and commercial banks are the dominant institutions in the Nigerian Money market. The major objective of this study is to analyze the effect of commercial bank credit on economic growth in Nigeria from 1986-2019. Data were obtained from Central Bank of Nigeria Statistical Bulletin 2019, and analyzed using the Autoregressive Distributed Lag regression techniques. The independent variables employed in the study include Commercial Bank Credit to the Private Sector, Lending Rate, and Liquidity Ratio. While, the dependent variable employed is Growth Rate of Gross Domestic Product, used as proxy for economic growth. The findings revealed that, Credit to the Private Sector had insignificant negative effects on economic growth in Nigeria. It was therefore, recommended that policies that will reduce the cost of credit, harmonize the formal and informal sectors of the money market, and enable the activities of the money market to stimulate economic growth be designed and implemented in Nigeria. The impact of Credit on economic growth is limited by the size of the informal sector (unbanked public) in the Nigerian environment.