Nexus between Bank Credit and Economic Growth in Nigeria: Evidence from VEC Model

Abstract

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.

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“…Study thus concludes that sectoral loans and advances to the preferred sector of the economic (production and general sector) has significantly stimulate economic growth while loans and advances allocated to other sectors is relegating economic growth. This result however, corroborate the report of Balago (2014) whose study suggest that increase in government allocation on production and manufacturing is capable of promoting economic growth.…”

Sectoral Allocation of Deposit Money Banks’ Credit and the Growth of Nigerian Real Economy: A Disaggregated Analysis (2008Q1 – 2017Q4)

“…Balago [54] looked into 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.…”

Faktor-Faktor Yang Mempengaruhi Efisiensi Investasi Pada Perusahaan Sektor Transportasi Periode 2018-2022

“…Menggambarkan hubungan agensi sebagai sebuah perjanjian kerja di antara satu pihak atau lebih yang berperan sebagai pihak utama yang ingin menggunakan jasa orang lain (agen) Jensen & Meckling, (1976) agar dapat memberikan layanan untuk memenuhi kepentinganya yang termasuk pelimpahan kepentingan, beberapa peraturan berdampak pada keputusan untuk agen serta memberikan timbal balik yang diberikan manajer atau agen. Menurut Balago (2014) dan Namazi, (2013) hubungan keagenan menyebabkan Salah satu masalah yang muncul adalah adanya asimetri informasi, di mana keadaan asimetri informasi terjadi ketika manajemen mempunyai informasi yang detail tentang informasi posisi keuangan yang terjadi dan kedudukan pihak eksternal dibandingkan pemilik perusahaan. Teori ini mengartikan tentang masalah-masalah keagenan karena pihak ketiga atau eksternal yang terjalin kerjasama dengan suatu perusahaan.…”