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.
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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
|
|||||||||||