Tag Archives: Bank credit

Differenced Model Analysis of Sectorial Bank Credits-Economic Performance Nexus: The Case of Nigeria (1987-2016) (Published)

This study examined the nexus of sectoral allocation of bank credits and economic performance in Nigeria from 1987 to 2016 by a differenced model analysis. The study employed secondary data sourced from the Central Bank of Nigeria (CBN) Statistical Bulletin. The ordinary least squares (OLS) method of regression analysis was adopted at both level series and first difference models to ensure stationarity of data and eliminate serial correlation which was tested using the Breush-Godfrey serial correlation LM test in order to ensure that the results obtained were not spurious. The results revealed: (i) positive and significant relationship between bank credits to the agricultural sub-sector and economic performance; (ii) positive but insignificant relationship between bank credits to the real estate and construction sub-sector and economic performance; (iii) positive but insignificant relationship between bank credits to the mining sub-sector and economic performance; (iv) negative but insignificant relationship between bank credits to the manufacturing subsector and economic performance; and (v) bank credits to the overall production sector (comprising the agricultural, real estate and construction, mining, and manufacturing sub-sectors) of the economy did not significantly contribute to economic performance. The study, therefore, recommended that more attention should be given to the agriculture sub-sector in terms of the amount of loans granted; as well as the assistance given to the subsector to encourage more participation and greater output so that it will continue to contribute more to economic growth in Nigeria.

Keywords: Bank credit, Differenced Model Analysis, Economic Performance, Sectoral Allocation

QUANTITATIVE ANALSIS OF THE IMPACT OF SMALL AND MEDIUM SCALE ENTERPRISES ON THE GROWTH OF NIGERIAN ECONOMY: (1993-2011). (Published)

This study is on the quantitative impact of Small and medium scale enterprises (SMEs) on Nigeria’s economic growth performance for the sample period 1993 to 2011. The econometric technique adopted for the study was multiple regression method based on ordinary least squares technique. However, in order to avoid the incidence of spurious estimates, evidence from the ADF test conducted revealed that the variables are integrated of order two,1(2). The Johansen test conducted showed evidence of long run equilibrium relationship between small and medium scale enterprises and economic growth. However, in the mean time, output of SMEs (SMEO) does not make any significant contribution to Nigeria’s economic growth performance. The study concludes that poor government policies, on tariffs and incentives, bribery and corruption, non-existent entrepreneurial development centers and poor state of infrastructure act as impediments to the growth and development of SMEs in Nigeria. The recommendations are that governments at all levels should endeavor to establish Microfinance institutions for easy access to credit by SMEs, introduce financial literacy in schools, establish entrepreneurial development centers for capacity building, provide enough infrastructure, especially electricity and road net work, and finally establish agencies for control of bribery and corruption.

Keywords: Bank credit, Inflation, Interest rates., Small and Medium Enterprises, economic growth

IMPACT OF BANK CREDIT ON ECONOMIC GROWTH IN NIGERIA: APPLICATION OF REDUCED VECTOR AUTOREGRESSIVE (VAR) TECHNIQUE (Published)

This study investigates the impact of bank credit on economic growth in Nigeria applying the reduced form of vector autoregressive (VAR) technique using time series data from 1960 to 2011. Current gross domestic product (GDP) is the dependent variable and proxy for economic growth while bank credit to the private sector (CPS) to GDP ratio and broad money (M2) to GDP ratio were proxies for financial indicator and financial depth respectively. We tested the stationarity of the variables using the Augmented Dickey-Fuller (ADF) and Phillips Perron (PP) unit root tests. All the variables were integrated of order one i.e., I (1). A major finding is that there is a significant positive relationship between bank credit to the private sector, broad moneyand economic growth. The past values of all the variables were significant in predicting their current values. This result implies that the bank consolidation and recapitalization exercise was a welcome development and further steps should be taken to ensure the stability of the banking sector.

Keywords: Bank credit, Broad money, Vector Autoregression, economic growth

QUANTITATIVE ANALSIS OF THE IMPACT OF SMALL AND MEDIUM SCALE ENTERPRISES ON THE GROWTH OF NIGERIAN ECONOMY: (1993-2011). (Review Completed - Accepted)

This study is on the quantitative impact of Small and medium scale enterprises (SMEs) on Nigeria’s economic growth performance for the sample period 1993 to 2011. The econometric technique adopted for the study was multiple regression method based on ordinary least squares technique. However, in order to avoid the incidence of spurious estimates, evidence from the ADF test conducted revealed that the variables are integrated of order two,1(2). The Johansen test conducted showed evidence of long run equilibrium relationship between small and medium scale enterprises and economic growth. However, in the mean time, output of SMEs (SMEO) does not make any significant contribution to Nigeria’s economic growth performance. The study concludes that poor government policies, on tariffs and incentives, bribery and corruption, non-existent entrepreneurial development centers and poor state of infrastructure act as impediments to the growth and development of SMEs in Nigeria.  The recommendations are that governments at all levels should endeavor to establish Microfinance institutions for easy access to credit by SMEs, introduce financial literacy in schools, establish entrepreneurial development centers for capacity building, provide enough infrastructure, especially electricity and road net work, and finally establish agencies for control of bribery and corruption.

Keywords: Bank credit, Inflation, Interest rates., Small and Medium Enterprises, economic growth

IMPACT OF BANK CREDIT ON ECONOMIC GROWTH IN NIGERIA: APPLICATION OF REDUCED VECTOR AUTOREGRESSIVE (VAR) TECHNIQUE (Review Completed - Accepted)

This study investigates the impact of bank credit on economic growth in Nigeria applying the reduced form of vector autoregressive (VAR) technique using time series data from 1960 to 2011. Current gross domestic product (GDP) is the dependent variable and proxy for economic growth while bank credit to the private sector (CPS) to GDP ratio and broad money (M2) to GDP ratio were proxies for financial indicator and financial depth respectively. We tested the stationarity of the variables using the Augmented Dickey-Fuller (ADF) and Phillips Perron (PP) unit root tests. All the variables were integrated of order one i.e., I (1). A major finding is that there is a significant positive relationship between bank credit to the private sector, broad money and economic growth. The past values of all the variables were significant in predicting their current values. This result implies that the bank consolidation and recapitalization exercise was a welcome development and further steps should be taken to ensure the stability of the banking sector.

Keywords: Bank credit, Broad money, Vector Autoregression, economic growth