Commercial Bank Credits and Industrial Subsector’s Growth in Nigeria

Abstract

This study investigates the impacts of commercial bank credit on Nigeria industrial subsectors between 1972 and 2012. Econometric Error Correction Model (ECM) was employed to estimate the output response of the three subsectors namely: the manufacturing; mining and quarry; and real estate and construction subsectors to commercial bank credits, as well as the  response of aggregate output of the entire industrial sector to subsector’s output and their commercial bank credits. The results of estimation indicate the following: commercial bank credits impacted positively and significantly on the manufacturing sub-sector in Nigeria, commercial bank credits to mining and quarry is a positive and significant determinant of the current year Mining and Quarry output in Nigeria, previous year bank credits to real estate and construction is a positive determinant of the current year real estate and construction output, bank credits to manufacturing, mining and quarry as well as bank credits to real estate and construction correlated positively with aggregate industrial output with bank credits to real estate and construction having greater and a significant impact on industrial output. interest rate was not an important determinant of industrial sector and industrial sub-sectors outputs, exchange rate is a negative and significant determinant of industrial sector’s outputs in Nigeria. These results point to the conclusion that, increase bank credits to industrial sector is indispensible in stimulating industrial sector growth in Nigeria.

Key word: Bank, Credits, ECM, Industrial subsectors, Nigeria