The study examines the relationship between bank
credit and economic growth in Nigeria by considering the total bank credit
extended to the production sector (which comprises manufacturing, agriculture,
fishery and forestry, mining and quarrying, real estate and construction), general
commerce sector (comprising: bills discounted, domestic trade, exports and imports)
and services sector (comprising: public utilities, transport and communication,
credit to financial institutions). Time series data from 1983-2012 were fitted
into the regression equation using various econometric techniques such as stationarity
test using Augmented Dickey Fuller (ADF) and Johansen Multivariate Co-Integration Test. Ordinary Least
Square Regression (OLS) and VEC Models were used to analyse the relationship
between the independent variables (total credits to production, general commerce
and services sectors) and dependent variable (real gross domestic product). The
result of the OLS shows that total bank credit to production, general commerce
and services sectors has a positive relationship with the gross domestic
product. Similarly, the VEC model result shows that causality runs from bank
credit to the GDP. This result is consistent with a number of earlier studies
reviewed in the literature that find causality running from bank credit to
gross domestic product.
Cite this paper
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