Impact of Bank Lending on Economic Growth in Nigeria

Abstract

In Nigeria, the banking sector is an important part of the financial system. The banking sector dominates the Nigerian financial system as it accounts for about 90% of the total assets in the system. However, the banking sector has not contributed significantly to the growth and development of Nigerian economy as expected. The poor performance of the sector has been attributed to numerous problems that faced the sector such as inadequate capital, high nonperforming assets which had led to frequent distress in the sector and collapse of banks in the past. This study is carried out to examine the impact bank lending on economic growth in Nigeria. In addition, the objective of this study is to examine the impact of bank lending on economic growth in Nigeria for the period 1987 to 2012. This study relies purely on secondary data, and using multiple regression model, the study find out that bank lending accounts for about 82.6% variation in economic growth in Nigeria for the period under study. The study concludes that there is a statistically significant impact of bank lending on economic growth in Nigeria. This, suggest that the performance of the Nigerian economy is greatly influence by bank lending. The study recommends that the federal government of Nigeria through the central bank of Nigeria (CBN) should strengthened the banking sector to ensure an improve credit flow to the activity sectors because of its strategic importance in creating and generating growth of the economy.

Keywords: Bank lending, economic growth, financial system, banks, banking sector, Nigerian economy, Gross Domestic Product (GDP)