Influence of Bank Credits on the Nigerian Economy

  • Idachaba Odekina Innocent Department of Banking and Finance, Ahmadu Bello University, Zaria, Kaduna State, Nigeria
  • Olukotun G. Ademola Department of Banking and Finance, Kogi State University, Anyigba, Kogi State, Nigeria
  • Elam Wunako Glory Department of Banking and Finance, Ahmadu Bello University, Zaria, Kaduna State, Nigeria
Keywords: Financial institutions, Bank credits, Economic Growth, Economic Development , Resources

Abstract

The aim of this study is to examine the influence of bank credits on the Nigerian economy using time series data covering the period from 1980 to 2017.Gross domestic product was used as proxy for the economy while credits to the private sector, public sector and prime lending rate were used as proxies of Banks credits. Unit root test was used to test stationary which reveals that all the variables were stationary at first difference. The regression analysis result shows that credit to the private sector have positive effect on Nigerian economy while credit to public sector and prime lending rate have negative effect on the Nigerian economy. The result of co-integration test presented reveals that there exist among the variables co-integration which means long-run analysis. It is recommended that, policy makers should focus attention on long-run policies to promote economic growth such as development of modern banking sector, efficient financial market, infrastructures.

References

Abubakar, A., & Gani, I. M. (2013). Impact of banking sector development on economic growth: Evidence from Nigeria. Journal of Business Management & Social Sciences Research (JBM&SSR), 2 (4), 47- 59.
Atseye, F. A., Edim, N. O., and Ezeaku, H. C. (2015). An Empirical Investigation of the Impact of Bank Credit on Economic Growth in Nigeria. Indian Journal of Applied Research, 5, Issue 11.
Akpansung, A. O. & Babalola, S. J. (2011). Banking Sector Credit and Economic Growth in Nigeria: An Empirical Investigation, CBN Journal of Applied Statistics, Vol. 2, No. 2. Pp. 51-62.
Akpansung, A. O. & , M. O.(2009). Recent Banking Reform in Nigeria: Implication on Sectoral Credit Allocation and Economic Growth, International Journal of Business and Social Science. Vol. 5, No. 13 (Dec) Pp.91.
Adekunle, O. A., Salam, G. O., & Adedipe, O. A. (2013). Impact of financial sector development on the Nigerian economic growth. American Journal of Business and Management, 2 (4), 347- 356.
Azege, M. (2007). The impact of financial intermediation on economic growth: The Nigerian perspective. Research Paper, Department of Economics, Lagos State University
Aliero, H. M., Abdullahi, Y. Z. & Adamu, N. (2013). Private Sector Credit and Economic Growth Nexus in Nigeria: An Autoregressive Distributed Lag Bound Approach, Mediterranean Journal of Social Sciences, Vol. 4, No. 1, (Jan) Doi:10.5901/mjss.2013.V4nlp83.
Ahmed, A. D. (2008). Financial Liberalization, Financial Development and Growth in Sub-Saharan Africa’s Economic Reform: An Empirical Investigation, Centre for Strategic Economic Studies, Victoria University, Austria.
Aurangzeb (2012). Contribution of banking sector in economic growth: A case of Pakistan. Economics and Finance review volume 2 (6).
Boyreau-Debray, G. (2003) “Financial Intermediation and Growth – Chinese Style.” Policy Research Working Paper 3027, The World Bank.
Central Bank of Nigeria (2003), CBN Briefs, 2008-2009 Edition, Research Department, CBN, Abuja
CBN report (2010). Central Bank of Nigeria monetary policy circular.
Dewett, K. K. (2005). Modern Economic Theory. New Delhi: Shyan Lal Charitable Trust.
Eatzaz, A. & Malik, A. (2009). Financial Sector and Economic Growth: An Empirical Analysis of Developing Countries, Journal of Economic Cooperation and Development, Vol. 30, No. 1, pp. 17-40.
Ekpenyong B. & Ikechukwu A. (2011): Banks and Economic growth in Nigeria, European Journal of Business and Management.
Hassan, M. K., Sanchez, B. & Yu, S. J. (2011). Financial Development and Economic Growth: New evidence from panel data. The Quarterly Review of Economics and Finance, 51(1), 88-104. DOI: http://dx.doi.org/10.1016/j.qref.2010.09.001.
Hale, B. ‘Nigeria’s economy dominated by Oil’. BBC News January, 16, 2002
Ibrahim, A.O.B., Akano A.I & Kazeem H.S. (2015) To What Extent Does Banks’ Credit Stimulate Economic Growth? Evidence from Nigeria. JORIND 13(1) pp. 128-139.
Kıran, B., N.C. Yavuz and B. Guriş (2009), “Financial Development and Economic Growth: A Panel Data Analysis of Emerging Countries,” International Research Journal of Finance and Economics 30, pp.87-94.
Koivu, Tuuli. (2002). "Do efficient banking sectors accelerate economic growth in transition Countries," Bank of Finland, Institute for Economies in Transition, BOFIT Discussion Papers 14.
Levine R. (1997), “Financial and Growth: Theory and Evidence” in the handbook of Economic Growth the Nether lands: Elsevier Science Press.
Levine, R., Loayza, N. & Beck, T., (2000) “Financial Intermediation and Economic growth: Causes and Causality” Journal of Monetary Economics, vol. 46, p.31-77.
Murty, K.S., K. Sailaja and W.M. Dimissie (2012.) "The Long-Run Impact of Bank Credit on Economic Growth in Ethiopia: Evidence from the Cointegration Approach", European Journal of Business and Management Vol 4, No. 14.
Marshal, I., Igbanibo, D.S. and Onuegbu, O.(2015) Causality modeling of the banking sector credits and economic growth in Nigeria. IIARD International Journal of Banking & Finance Res 1(7):1–12.
Mishra, P.K., K.B. Das and B.B. Pradhan 2009. "Credit Market Development and Economic Growth in India", Middle Eastern Finance and Economics.
Mckinnon, R. I. (1973). Money and capital in economic development. Washington D.C: Brookings Institute
Muhsin, K. & Eric, J. P. (2000). “Financial Development and Economic Growth in Turkey: Further Evidence on the Causality Issue” Centre for International, Financial and Economics Research Department of Economics Loughborough University
Modebe, N. J., Ugwuegbe, S. U. & Ugwuoke, R.O. (2014) The Impact of Bank Credit on the Growth of Nigerian Economy: A Co Integration Approach. Research Journal of Finance and Accounting, Vol.5, No.10, pp.87-95.
Nuno, C. L. (2012). Bank Credit and Economic Growth: A Dynamic Panel Data Analysis, The Economic Research Guardian, Vol. 2, No. 2, pp. 256-267
Nzotta, S.M. (2004) Money, Banking and Finance, Theory and Practice Owerri Hudson Jude Publishers.
Nwanyanwu, O.J. (2010). An analysis of bank credit on the Nigeria economic growth, 1992-2008.Jos Journal of Economics. 4: 4-58
Ogege, S. and Boloupremo, T. (2014). Deposit Money Banks and Economic Growth in Nigeria. Financial Asset and Investing, (1), 41-50.
Olokoyo F.O. (2011) Determinants of Commercial Banks’ Lending Behavior in Nigeria. International Journal of Financial Research Vol. 2, No. 2; pp. 61-72.
Orji, A.(2012) Bank Savings and Bank Credits in Nigeria: Determinants and Impact on Economic Growth. International Journal of Economics and Financial Issues Vol. 2, No. 3, 2012, pp.357-372.
Schumpeter, J. A. (1934). The theory of economic development. Cambridge: Havard University Press.
Shittu, A. I. (2012), “Financial Intermediation and Economic Growth in Nigeria”, British Journal of Arts and Social Sciences, Vol.4 No.2. pp. 164-179.
Solanke, O. ‘Vision 2020: Need for a Purposive Approach’, (2007), . Accessed on March 4, 2008.
Shaw, E. (1973). Financial deepening in economic development .London: Oxford University Press.
Yakubu, Z. and Affoi, A.Y. An analysis of commercial banks’ credit on economic growth in Nigeria.Current Research Journal of Economic Theory. June, 2014, 6 (2): 11-15.
Published
2019-03-25
How to Cite
Innocent, I. O., Ademola, O. G., & Glory, E. W. (2019). Influence of Bank Credits on the Nigerian Economy. American Economic & Social Review, 5(1), 1-9. https://doi.org/10.46281/aesr.v5i1.240
Section
Research Paper/Theoretical Paper/Review Paper/Short Communication Paper