CONCLUSION AND RECOMMENDATIONS OF BANK CREDIT AND ECONOMIC GROWTH

AN ANALYSIS OF BANKS’ CREDIT ON THE NIGERIAN ECONOMIC GROWTH (1992- 20013)
NIGERIAN JOURNAL OF ECONOMICS, VOL.4, NO.1 54


The paper examined the role of bank credit in economic growth of Nigeria. Based on the finding of the study, it was observed that bank credit has not impacted significantly on the growth of the Nigerian economy. This is attributed to the fact that banks exhibit apathy in lending to the private sector for productive purposes e.g. agricultural sector, as they prefer to lend to the short-term end of the market, e.g. commerce, which attracts quick and high rate of turnover. As a result of this, the volume of loan actually given to investors is insignificant. 

Furthermore, World Bank (2007) as cited by Dalis (2010) observed that the Nigerian Banks are burdened with excess liquidity but simultaneously very cautious in providing credit to private sector. Excess liquidity exists because financial intermediaries lack investment opportunities with sufficient returns or perceive the risk in intermediating funds to be too great. Weak financial intermediation capacity has (limited access to finance for investment. Firms have been forced to rely to a high degree on self-financing. A large proportion of the total credit of deposit money banks that goes to the government are usually not for productive purposes. Most government expenditures are on transfers’ payment with little impact on productivity. 

The oil sector, which dominates the Nigerian economy, has contributed immensely to the GDP of Nigeria, thus banks aggregate credit has little or no significance on the growth of the economy. In view of these, it is recommended that banks should be willing to give both short and long-term loans for productive purposes, as this will eventually lead to economic growth. Better and stronger credit culture should be promoted and sustained. There should be strong and comprehensive legal framework that will aid in monitoring the performance of credit to private sector and recovering debts owed to banks. Banks should also share among themselves; information on bad debtors and each bank should maintain a black book for this purpose. The Central bank of Nigeria should adopt direct credit control, where preferred sectors like agriculture and manufacturing sectors should be favoured in terms of granting loans.


REFERENCES
Adekanye, F. (1986). Elements of Banking in Nigeria, Lagos: F and A Publishers. Ademu, W. A. (2006). “The Informal Sector and Employment Generation in Nigeria: The Role of Credit.” Employment Generation in Nigeria. Selected Papers for the 2006 Annual Conference of the Nigerian Economic Society, in Calabar, august 22nd to 24th.

Adeniyi, O.M. (2006). Bank Credit and Economic Development in Nigeria: A Case Study of Deposit Money Banks. Jos: University of Jos Akintola, S. (2004). “Banks Move Against Soludo” Nigerian Tribune (July 23rd), p.24 Bencivenga, V. R. and Smith B. D. (1991). Financial Intermediation and Endogenous growth. Review of Economics Studies. Vol. 58, P. 195-209 Central Bank of Nigeria (2003). CBN Briefts. Abuja: Research Department. ---------- (2007). Annual Report. Abuja: CBN ------------ (2007). CBN Statistical Bulletin. Abuja: CBN ----------- (2008). CBN Statistical Bulletin (Golden Jubilee Edition). Abuja: CBN Dewett, K. K. (2005). Modern Economic Theory. New Delhi: Shyam Lal Charitable Trust.

Ekundayo, J.O. (1996). “Banking Practices and the Nigerian Economy–The Way Forward” The Nigerian Banker, (Jan – June), p.9-21. Goldsmith, R. W. (1969). Financial Structure and Development. New Haves CT: Yale University Press. Greenwood, J. and Jovanovich, B. (1990). “Financial Development, Growth and the Distribution of Income”. Journals of Political Economy. Vol.98, P. 1076-1107
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Jhingan, M. L. (2006). The Economics of Development and Planning (38th Ed). Delhi: Virnda Publication (P) Ltd. McKinnon, R. (1973). Money and capital in Economic Development. Washington: The Brooking Institute. Nnanna, O. J. (2004). “Financial Sector Development and Economic Growth in Nigeria: An Empirical Investigation”. Economic and Financial Review. Vol.42, (3) P.1-17

Nnanna, O. J., Englama, A., and Odoko, F. O. (Eds.) (2004). Financial Markets in Nigeria. Abuja: Kas Arts Service. Ochejele, J.J. ( 2007). Economic Analysis. Jos: Ichejum Press. Schumpeter, J. A. (1934). The Theory of Economic Development. Cambridge, Mass: Havard University Press. Shaw, E.S. (1973). Financial Deepening in Economic Development. New York: Oxford University Press. Spencer, H. M. (1977). Contemporary Macroeconomics (3rd Ed). New York: Worth Publishers.

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Appendix 1 Shaw, E.S. (1973). Financial Deepening in Economic Development. New York: Oxford University Press. SUMMARY OUTPUT
Regression Statistics
Multiple R
0.189056188
R Square
0.035742242
Adjusted R Square
-0.028541608
Standard Error
6.00547549
Observations
17
ANOVA
df
SS
MS
F
Significance F
Regression
1
20.05278554
20.05278554
0.556006555
0.467398646
Residual
15
540.986038
36.06573587
Total
16
561.0388235
Coefficients
Standard Error
t Stat
P-value
Lower 95%
Upper 95%
Intercept
1.764266704
3.01807057
0.584567744
0.567527483
-4.66859841
8.197131819
GADCE %
0.051877173
0.069572298
0.745658471
0.467398646
-0.096412668
0.200167014
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