The Empirical Analysis of the Impact of Intermediation Roles of Banks on the Performance of the Nigerian Economy (2003 – 2013)

Abstract

This paper is a part of my dissertation research on the impact of intermediation roles of banks on the performance of the real sectors of the Nigerian economy. The main objective is to find out if the banking industry loans and advances have any significant effect on the real sector GDP growth rate, using manufacturing component of GDP as the representative of the real sector. The research design adopted in this dissertation was ex-post facto. The paper analyzed published audited accounts of twenty (21) out of twenty-five (25) banks that emerged from the consolidation exercise that took place in 2005 in Nigerian banking industry and data from the CBN on the sectors’ GDP growth rate. The study covers an 8 year period (2005-2013). Parametric statistics in forms of analysis of variance-ANOVA, mean, standard deviation, t-test, co-efficient of correlation and simple linear regression were used to analyze the hypothesis. The paper found out that banking sector intermediation has significantly improved the GDP component of the manufacturing sector, hence, has contributed marginally to the overall growth of the real sector for sustainable development. The paper concludes that banking sector is becoming more competitive in their intermediation roles as consolidation reform has created an atmosphere where many banks simply cannot afford to have weak balance sheets and inadequate corporate governance. The study recommends among other things that CBN should continue to collaborate with all the stakeholders in the financial sector to ensure that any bank reform to be introduced in the banking industry must be market driven to allow for efficient intermediation process necessary for improved real sector GDP growth rate.

Keywords: GDP, Real sector, Manufacturing, Intermediation, consolidation, Banks.