ABSTRACT
This work is
based on the impact of deposit money bank credits on Nigeria economic growth.
The main objective of this study is; to ascertain the impact of deposit money
bank credits on economic growth of Nigeria (1981-2016). A model was constructed
to incorporate real gross domestic product (RGDP) as the dependent variable
proxy of economic growth, commercial bank credit (CBC) and interest rate (INTR)
as the independent variables and tested using the ordinary least-square (OLS)
techniques. The empirical result shows that commercial bank credit and interest
rate have negative relationship and insignificant impact on the economic growth
in Nigeria. From the granger causality test result, inflation rate and interest
rate have no causal relationship with real gross domestic product in Nigeria.
Also no causal relationship exist between INTR and RGDP, finally no causal
relationship exist between commercial bank credit (CBC) and interest rate
(INTR) Based on the result, the researcher recommends that the Central Bank of
Nigeria and other monetary authorities should reduce the interest rate being
charge on loans borrowed from the commercial banks through the reduction of
bank rate and other deposit requirements of the commercial banks in order to
make funds available to the potential investors which will increase the
national output though their production.
CHAPTER
ONE
INTRODUCTION
1.1
Background of the Study
Deposit money bank are resident
depository corporations and quasi-corporation which have any liabilities in the
form of deposit payable on demand, transferable by cheque or otherwise usable
for making payments.
A growing body of work in advanced
economies has shown that deposit money bank credits are one of the greatest
drivers of economic growth and development. Thus, most countries with
well-functioning financial system and large volume of deposit money bank credit
are characterized with substantial and sustained growth as well as economic
development (Nabila Zakir,2014, Sunde 2013). This suggest that as an economy
becomes large, there is increasing need for increased and targeted deposit
money bank to critical sector of the economy including households.
This banking institution is responsible for financial intermediation in
Nigerian financial system, which enables the channeling of fund from the
surplus unit of the economy to the deficit unit of the same economy, thereby
transforming deposit to credit (loan).
According to Ademu (2006) in Nwanyanwu (2010), the provision of credit
with sufficient consideration to growth potential in the sector as well as
price system in the economy is one of the ways to generate employment
opportunities and by so doing, contributing to the growth of the economy at
large. This can be made possible because bank credit contribute immensely to
the expansions of business enterprise, increase scale of production which
results to growth in the overall economy.
Ademu (2006) highlighting the role of bank credit explained that it can
be used to prevent economic activity from total collapse in the event of
natural disaster such as flood, drought, disease or fire. Importance of bank
credit to the Nigerian economy has led to sustained increase of credit to
productive sector of Nigeria economy. Central bank of Nigeria annual report
(2010), noted that credit to the core private sector to the deposit money bank
grows by 10.26% between 2009-2010. In making credit available, banks are rendering
great social services because through their actions production is increased,
capital investment are expanded and ahigher standard of living realized.
The concept of economic growth is viewed as an increase in the net
national product in a given period of time (Dewett 2005) he explained that
economic growth is generally referred to as a quantitative change in economic
variable, normally persisting over successive periods. The role of credit in
economic growth has been recognized as credits are obtained by various economic
agents to enable them meet operating expenses (Nwanyanwu 2008), Furthermore,
according to Ademu (2006), the provision of credit with sufficient
consideration for sector’s volume and price system is a way of achieving
economic growth through self-employment opportunities while highlighting the
role of credit to the growth of any economy. (Shaw, 1973; Mckinnon 1973)
economic growth is one of the important factors that improve living standard in
developing countries. It is an indispensable requirement for economic
development among other factors it is believed that the main factors affecting
economic growth are labor, capital and exogenously determined technology. The
impact of deposit money bank credits are relevant to the economic growth of
Nigeria.
1.2
Statement of the Problem
The duty of the deposit money bank
credit is to mobilize resources, so as to be able to provide long term funds to
the business sector. Little studies has been done to find out the impact of
deposit money bank credits have to the growth of national economies Tuuli
(2002) posits that although there have been numerous empirical studies on the
determinant of growth in transition economies, the relationship between bank
credits and economic growth, however has been largely ignored.
Generally, economic growth has long been considered an important goal of
economic policy with substantial body of research dedicated to explaining how
this goal can be achieved. But unfortunately, such concerted effort in both
researchers and policies have yielded no meaning result. Thus, studying the
impact deposit money bank credits have on the economic growth of Nigeria has
become very necessary until this vacuum is filled, the unavoidable questions on
this study will remain unanswered.
1.3
Research Question
This study is based on the following
research question
1. What
is the impact of deposit money bank credits on Nigeria’s economic growth?
2. To
what extent has deposit money bank lending rates affected the economic growth
in Nigeria?
3. To
what extent has money supply influenced Nigeria’s economic growth?
1.4
Objective of the Study
The general objective of this study is
to ascertain the impact of deposit money bank credits on economic growth of
Nigeria. In line with this, the specific objective of the study include the
following
1) To
evaluate the impact of deposit money bank credits on Nigeria’s economic growth.
2) To
ascertain the effect of deposit money bank lending rates on Nigeria’s economic
growth.
3) To
ascertain the impact of money supply on the Nigeria’s economic growth.
1.5
Hypotheses of the Study
The hypotheses of this study are as
follows
Hypotheses one
Ho: deposit money bank credits do not have
any significant impact on Nigeria’s economic growth.
Hypotheses two
Ho: deposit money bank lending rates do
not have any significant impact in Nigeria’s economic growth.
Hypotheses three
Money supply does not have any
significant impact on Nigeria’s economic growth.
1.6
Scope of the Study
The study will focus on the impact of
deposit money bank credits on economic growth of Nigeria over the period of
1980 to 2015. This study covers the period of 35 (thirty-five) years. Bank
credits as shall be used in this study are credits advanced by deposit money
banks in Nigeria. Economic growth shall be peroxide by the real gross domestic
product (RGDP)
1.7
Significance of the Study
The study will be of immense benefit to
the following
Bankers: the study will enhance their
understanding of the relationships existing between bank credits and economic
growth. This will go a long way in enabling them carry out efficient financial
intermediation function bearing in mind how it impact on economic growth.
Government:different levels of
government will find this study useful especially policy implementation,
enactment of laws and making pronouncement that will promote economic growth
Researcher: other researchers will find
this study very useful since it will add to the existing knowledge. Such
researchers and students who wish to carry out a related study will have to use
it as a research material.
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