Abstract
The study examined the determinant of private sector credit and its implication on economic growth in Nigeria. The fluctuation in the supply of money and credit is the basic causal factor at work in cyclical process; when money supply falls, prices decrease, profit decrease, production activities become sluggish and production falls and when money supply expands, price rise, profit increase and the total output increases and finally growth takes place. The main objective of this study is to examine the relationship between Private Sector Credit and Gross Domestic Product. Data were obtained from Central Bank of Nigeria statistical bulletin. Simple regression analysis was used to achieve the stated objective. It was revealed in the determinant of credit supply equation 1 that there was significant relationship between Total credits to private sector and money supply in Nigeria. It was also discovered in the Private Sector Credit and Economic Growth Equation 2 that there was significant relationship between private sector credit and economic growth in Nigeria. The study therefore recommends that there should be persistence increase of money supply to Nigerian economy in order to increase the flow of credit to the real sector of the Nigerian economy, financial institutions should distribute more credit to the real sector for productive purposes in order to increase Gross domestic product.
Highlights
The debate on the role of finance in economic development has been an ongoing one, especially in developing countries
The major objective of this study is to examine the relationship between Private Sector Credit and Gross Domestic Product
Discussion on Findings The data collected for analysing the determinant of private sector credit and its implications on economic growth in Nigeria was presented in Appendix
Summary
The debate on the role of finance in economic development has been an ongoing one, especially in developing countries. This dates back to the work of the likes of Schumpeter, (1911) who advocated the concept of finance-led growth. Credit to private sector refers to financial resources provided to the private sector, such as loans and advances, purchases of non-equity securities, trade credits and other accounts receivable, which establish a claim for repayment. In this regard, credit can be viewed from two angles; namely: trade or commercial credit and banking system credit.
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