Impact of Commercial Banks’ Credit to the Real Sector on Economic Growth in Nigeria

The study examined the effect of commercial bank sectorial credit to the manufacturing and agricultural sub-sectors on economic growth in Nigeria with time series data from 1981 to 2015, using co-integration and error correction mechanism for the empirical work. A three equation model was specified to analyze this study, and the variables include; real GDP, bank sectorial credit to manufacturing and agriculture subsectors, monetary policy rate, financial market development, sourced from CBN statistical bulletin and also the interaction variables,. The variables were tested for unit root using the Augmented Dickey Fuller approach and were found to be stationary. The empirical result revealed that commercial bank credit to the manufacturing and agricultural subsectors significantly affects economic growth in Nigeria both in the short run and in the long run. Furthermore, development of the financial sector enhances the growth effects of commercial banks credit to the manufacturing and agricultural subsectors of the economy. It was therefore recommended that the Nigerian apex financial authorities should encourage banks via deliberate policy to increase credits to these subsectors of the economy.

JEL classification: E44, Q14.