Banks Financing and Industrial Sector Performance in Nigeria

Akinwumi Olusegun Akinola,Alani Olusegun Efuntade,Omotayo Olubunmi Efuntade

doi:10.11648/j.ijafrm.20200503.15

Akinwumi Olusegun Akinola, Alani Olusegun Efuntade + Show 1 more

Open Access

https://doi.org/10.11648/j.ijafrm.20200503.15

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Abstract

This paper examined the effect of banks financing on industrial sector growth in Nigeria. The objectives of the Study were to examine the effects of domestic money supply, banks credit and maximum bank lending rate on industrial sector performance in Nigeria. The Study is established on Bank-based monetary framework on the grounds that the hypothesis focuses on the positive functions of banks in industrial growth and development. Descriptive and Ex-post facto research designs were adopted to investigate the contribution of various bank financing variables to industrial sector growth measured by manufacturing sector output in Nigeria over a period of 15 years (2004-2018). Method of analysis was the linear regression model using fully modified ordinary least square model to estimate the individual effects of banks financing variables measured by banks credits, domestic money supply, and maximum bank lending rate on industrial sector growth measured by manufacturing sector output. The study revealed that industrial sector growth is strongly impacted upon by banks credits, domestic money supply, and maximum bank lending rate. The study concluded that, there is positive significant relationship between bank credits, domestic money supply and growth in the industrial sector. Therefore, the study recommended that, banks should continue to support the industrial sector through credit borrowing, this way, the dwindling nature of Nigeria industrial sector can be redressed through adequate credits provided by these banks. However, these credits should be given at lower interest rate.

Highlights

The advent of unrestricted market economy in the developing nations has been seemed cognizant effort in the development of the industry [17]
From the findings made in hypothesis one, the result indicates that banks credit is a major tool stimulating industrial sector growth in Nigeria
This study has examined the impact of banks financing on growth of industrial sector in Nigeria using and macroeconomic variables approach

Summary

Introduction

The advent of unrestricted market economy in the developing nations has been seemed cognizant effort in the development of the industry [17]. The role played by the banking industry through its financing cannot be over emphasized as it provides the necessary and desired impetus to industrial sector growth of the global economy. Industrialization is globally believed to be a catalyst for rapid growth and development of any economy. As a process, it presupposes the provision of appropriate institutions by the state [21]. The role of leading sector has usually been played by industrial sector under the industrialization process. Against this background, industrialization involves extensive technology based development of the productive (manufacturing) system of an economy [5]

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