Banks and Economic Growth in Nigeria

Abstract

The study examines the contribution of banks in Nigeria to the growth of the economy. It used bank savings mobilization and credit to the real sector as proxy for banks contribution while gross domestic product growth rate proxies’ economic growth. Before correlation analysis and regression were used to test hypothesis, diagnostic tests were carried out on the variables to ensure stationarity and examine the cointegration properties of the model. Augmented Dickey-Fuller test was used to test stationarity while Trace statistic and Eigenvalue test were used to assess cointegration. Results show an insignificant impact of banks intermediation variables on economic growth. The study therefore concludes that the poor performance of these variables indicate that other variables such as human resources, social infrastructure, political stability and technology may play more robust role in economic growth in Nigeria than banks. In the light of this, urgent improvement in social infrastructure especially power supply and reversal of the decline in education were recommended.