Deposit money bank’s credit to private sector and economic growth in Nigeria

Abstract

In this study, the empirical impact of loans to the private sector on Nigeria's economic growth from 1981 to 2021 is evaluated. The impact of CPS on Gross Domestic Product Growth (GDPG) was examined using series data and the ordinary least squares technique. Credit to the private sector, lending rate, and deposit money bank's assets were used as independent variables. The series' data were taken from the World Bank Indicators 2021 and the Central Bank of Nigeria's Statistical Bulletin 2021. The analysis's findings indicate that all of the variables, including Gross Domestic Product (GDPG), CPS, INTR, and DMBA, were stationary at 1st difference. The analysis discovered that the variables are cointegrated, which means they have a long-run link, even though interest rate was statistically proven to have a negative impact on economic growth. As a result, the study advises policymakers to adopt measures that will direct more money into the economy's productive sectors, and banks should act as effective financial intermediaries so that financial resources are allocated to the most productive uses in order to boost economic growth in Nigeria.