Since its inception, the banking
system has been providing credit to the Nigerian economy. In order to examine
the role of bank credit to the economy, the aggregate bank credit to the
economy is used to estimate its impact on Nigeria’s economic growth, which is
proxied by gross domestic product.
This credit is classified into credit to the public sector (government) and credit to the private sector. This section presents and examines credit to these sectors from 1992 to 2008 with a view to assessing its impact on the growth of the Nigerian economy.
This credit is classified into credit to the public sector (government) and credit to the private sector. This section presents and examines credit to these sectors from 1992 to 2008 with a view to assessing its impact on the growth of the Nigerian economy.
TABLE 1: AGGREGATE DOMESTIC CREDIT OF
DEPOSIT MONEY BANKS AND GROSS DOMESTIC PRODUCT (N M)
Sources:
1. CBN Statistical Bulletin (2007)
2. CBN
(2008). Statistical Bulletin (Golden Jubilee Edition)
3. ** Calculated from
column 1
4. *** Calculated from column 4
Data
on aggregate domestic credit of deposit money banks reveal that between 1993
and 1994, credit to the economy grew from 64.5 per cent to 67.3 per cent.
Between 1995 and 2008, credit to economy fluctuated as follows with 24.1% in
1995, 34.7% in 1996, 25.9% in 1997, 14.8% in 1998, 55.7% in 1999. 42.1% in
2000, 32.7% in 2001, 37.9% in 2002, 15.3% in 2003, 38.4% in 2004, 20.5% in
2005, 40.2% in 2006, 86.1% in 2007 and 45.7% in 2008. The highest growth rate
was recorded in 2007, which could be attributed to the gains on
post-consolidation of Nigerian Banks.
The data in table 1 shows that output
represented by real GDP in Nigeria and aggregate credit of DMBs to the economy
showed volatile trends. The GDP was low between 1993 and 1995 with a negative
growth rate of 3.7%, 1.3%, and 5.2%, respectively. A growth rate of 0.8 was
recorded in 1996, which declined to 0.4% and -6.9% in 1997 and 1998,
respectively. Output grew steadily between 1999 and 2002 with 3.4% in 1999,
3.4% in 2000, 7.0% in 2001 and 10.1% in 2002. The highest growth rate ever
recorded was 11.9% in 2004.
Between 2005 and 2008, there were fluctuations in the growth rate of output. This indicated the poor performance of the economy. Percentage growth in output has been insignificant compared to aggregate domestic credit of deposit money banks. This can be attributable to the fact that deposit money banks’ credit is short tenured, which to a large extent may reduce the ability of such credits to impact positively on the economy.
Between 2005 and 2008, there were fluctuations in the growth rate of output. This indicated the poor performance of the economy. Percentage growth in output has been insignificant compared to aggregate domestic credit of deposit money banks. This can be attributable to the fact that deposit money banks’ credit is short tenured, which to a large extent may reduce the ability of such credits to impact positively on the economy.