Impact of Intermediation of Commercial Banks on Capital Formation in Nigeria

Abstract

This study examined the impact of intermediation of commercial banks on capital formation in Nigeria. A sample of fifteen (15) banks listed on the NSE between 2000 to 2019 was utilized by the study and data was gathered mainly through secondary sources. The study employed time-series data and ex-post facto research designs to establish the impact of total deposit liabilities, credit to private sector and bank investment on the gross fixed capital formation in Nigeria. The data was analysed using the ordinary least square (OLS) regression technique after conducting series of diagnostic tests, multicollinearity, serial correlation, normality, heteroskedasticty and stationarity tests. The study documented negative and statistically significantly between total deposit liabilities and gross fixed capital formation. Furthermore, results from the regression analysis established positive and significant impact of credit to private sector on the gross fixed capital formation in Nigeria. Further analysis revealed a positive and insignificant impact between bank investment and gross fixed capital formation in Nigeria. The study concluded that total deposit liabilities, credit to private sector play major role in influencing capital formation in Nigeria while bank investment does not influence capital formation in Nigeria. The study therefore recommended among others that adequate efforts be made by commercial banks to increase their level deposits as that will help in increasing the nation’s capital formation. This will most likely result into increased investment activities which will enhance capital formation in Nigeria needed for its real sector investments and industrial growth. It was also recommended that Commercial banks credit department should advance more credit to private sector used for economic activities that will impact the real economy like the manufacturing and agricultural sectors