The Impact of Bank Credits on the Manufacturing Sector in Nigeria (1980-2015)

Abstract

The study examined the impact of bank credits on the manufacturing sector in Nigeria from 1980 to 2015. The broad objective of the study is to examine the impact of bank credits on the manufacturing sector in Nigeria between 1980 and 2015. The econometrics methods of ordinary least squares, co-integration, error correction model and granger causality test were used as the main analytical tools. From the estimated error correction model, we found that bank credits to the manufacturing sector had a positive impact on the manufacturing sector output. Government expenditure, gross capital formation and tertiary school enrolment conforms to apriori expectation. A bank credit was found to be necessary for influencing or boosting manufacturing sector output. In addition, the granger causality result reveals that there is causal relationship between bank credits and manufacturing sector output in Nigeria. It is therefore recommended that the cost of borrowing should be reduced, and relevant authorities should maintain a sustained effort aimed at making sure that banks strictly comply with the credit concession granted to the manufacturing sector, and the government should provide social amenities and conducive environment for industrialization.