Further Empirical Examination on Determinants of Bank Credit Growth in Nigeria: A Supply Side Approach

Oluboyo Bernard Oluwapelumi

doi:10.7176/rjfa/12-11-02

Abstract

This study examined and carried out further examination on the determinants of aggregate bank credit growth in Nigeria from the period of 1984 to 2020. It specifically investigates the determinants of bank credit growth to private and public sectors of the Nigerian economic growth performance. The study employed econometric approach to further carried out the examination on the determinants of aggregate bank credit growth in Nigeria by applying the estimation techniques of Augmented Dickey Fuller (ADF)/unit root test, correlation analysis and ordinary fitted regression analysis. The study addressed broad money supply, monetary policy rate, inflation rate, exchange rate and real gross domestic product as explanatory variables while aggregate bank credit to private and public sectors was regressed as the explained variables. The data used for the analysis were gathered from secondary sources of Nigeria Central Bank Statistical Bulletin and National Bureau of Statistics.The findings revealed that monetary policy rate, money supply and real gross domestic product have significant and positive effects on aggregate credit to private and public sectors (credit growth) aside exchange and inflation that have a negative and insignificant effect. The effect of these is that macroeconomic variables used are the true parameter of measuring aggregate bank credit growth in Nigeria. The short run result and regression results validates and support the influence of aggregate bank credit as a major determinant of credit supply via financial and non financial intermediaries. While the financial reforms and bank reforms also strengthen the banking sector towards meeting their obligations towards investment proliferation and economic growth performance. JEL Classification Numbers: E44, E51, G21 Keywords: Bank credit, Aggregate credit to private and public sector, SMEs, Nigeria DOI: 10.7176/RJFA/12-11-02 Publication date: June 30 th 2021

Highlights

The data used for the analysis were gathered from secondary sources of Nigeria Central Bank Statistical Bulletin and National Bureau of Statistics.The findings revealed that monetary policy rate, money supply and real gross domestic product have significant and positive effects on aggregate credit to private and public sectors aside exchange and inflation that have a negative and insignificant effect
5.0 Conclusions and Recommendations This study further examined the empirical analysis on determinants of bank credit growth in Nigeria: a supply side approach and this is a meaningful addition to existing literature- expecially in Nigeria – by providing empirical indication
All the variables used were stationary after first differencing indicating a short run relationship among the macroeconomic variables applied

Summary

Introduction

This paper tries to shed light on these questions by applying econometric approach in investigating data on macroeconomic variables of monetary policy rate (MPR), inflation (INF), exchange rate (EXG), real gross domestic product (RGDP) and aggregate bank credit to private and public sectors (BCr- credit growth) over the last decade, covering both pre-crisis and post-crisis periods i.e from 1984 to 2020. Answering these questions www.iiste.org will provide insights into the empirical relationship between financial sector reforms and their implications for banks' credit supply to other sectors. A laudable deduction from the outcome is that reduced government’s domestic borrowing, lower cost of borrowing, and lower central bank reserve requirements for commercial banks in Ghana are needed to enhance higher lending and credit demand

Objectives

Findings

Conclusion