Abstract
This study examined the effect of sectorial microcredit allocation on Nigeria economic development. Time series data were sourced from Central Bank of Nigeria Statistical Bulletin from 1992-2019. Nigeria per capita income was proxied for dependent variables while microcredit to agricultural sector, mining and querying, manufacturing sector, real estate and construction and transport and communication were proxies for independent variables. The study employed descriptive statistics and multiple regression models to estimate the relationship that exists between sectorial microcredit allocation and economic development. Ordinary Least Square (OLS), Augmented Dickey Fuller Test, Johansen Co-integration test, normalized co-integrating equations, parsimonious vector error correction model and pair-wise causality tests were used to conduct the investigations and analysis. The study found that 59 percent variation on Nigeria per capita income can be traced to variation on microcredit allocation to the various sectors of the economy. microcredit to transport and communication have positive and no significant effect, microcredit to real estate and construction have negative but no significant effect, microcredit to manufacturing sector have negative and significant, microcredit to mining and querying have positive and significant effect while microcredit to agricultural sector have positive and significant effect on Nigeria per capita income. From the findings, the researcher concludes that microcredit allocation have significant effect on Nigeria economic development. It recommends that for re-introduction of the abolished compulsory sectorial lending operation and sectorial reforms to attract microcredit. Microfinance banks should be encouraged to increase their branches so as to reach out and provide loans to more clients in order to achieve greater investment purposes. Government should further encourage the activities of micro finance banks by creating enabling environment so that they can further support the growth of business enterprises in Nigeria.
Highlights
The core objectives of National Integrated Rural Development Plan (2000) for Microfinance banks are; to ensure significant reduction of poverty and its eradication in the shortest possible time; mobilize and empower rural population to create wealth through increased agriculture, industrial and other productive activities; promote the expansion of the productive base of the rural economy through the creation of non-agricultural enterprises; provide rural support services needed to bring about increased production of goods and services; provide access to extension services, input, credit and marketing services; and to raise rural productivity in general (Adebayo, 2018).The Integrated Rural Development Plan identifies poverty reduction, mobilization of savings and financing agriculture as the three cardinal transmission channels through which micro financing enhances rural economic growth and development
While there are many studies on the role of microfinance, most of the studies focused on microfinance and the performance of small and medium scale enterprises (Akani and Uzah, 2018; Andabai and Jessie, 2018; Asor, Essien and Ndiyo, 2016), this study examined the role of microfinance banks in economic development in Nigeria
The results further show that the adjusted r-squared is 0.391087 indicating that 39.1 percent changes in Nigeria per capita income are attributable to microcredits to the various sectors of Nigerian economy
Summary
The core objectives of National Integrated Rural Development Plan (2000) for Microfinance banks are; to ensure significant reduction of poverty and its eradication in the shortest possible time; mobilize and empower rural population to create wealth through increased agriculture, industrial and other productive activities; promote the expansion of the productive base of the rural economy through the creation of non-agricultural enterprises; provide rural support services needed to bring about increased production of goods and services; provide access to extension services, input, credit and marketing services; and to raise rural productivity in general (Adebayo, 2018).The Integrated Rural Development Plan identifies poverty reduction, mobilization of savings and financing agriculture as the three cardinal transmission channels through which micro financing enhances rural economic growth and development. Two commonly cited underlying causes are: (1) prevalence of inappropriate saving products and poor services by depository institutions; and (2) lack of confidence in the safety or liquidity of financial institutions by rural people (Akani and Momdu, 2016). The underlying theory of microfinance bank is that, by making financial services available to a previously excluded section of society, microfinance banks is aimed at providing the poor clients with capital for investments, extra liquidity to allow them to take advantage of economic opportunities as they arise, and the opportunity to accumulate assets and gain access to savings to help protect against shocks in times of need (Akanji, 2011). Microfinance and rural economic development conceptualization embraced by most country in recent years refers to a process through which sustained increase in the productivity and income of the urban-rural workers and household are attained (Apalia, 2017)
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