Commercial Bank Credit and Manufacturing Sector Output in Nigeria

Abstract

The study examined the effect of commercial bank credit on the manufacturing sector output in Nigeria from 1980 to 2015 using Cochrane-Orcutt method. Five variables of manufacturing sector output, inflation rate, interest rate, loans and advances and broad money supply were used for the study. The variables were tested for unit root using the Augmented Dickey Fuller approach and were found to be stationary at levels. The study found that, inflation rate and interest rate have negative effect on manufacturing sector output while loans and advances and broad money supply have positive effect with manufacturing sector output in Nigeria. The study therefore recommended formulation and implementation of policies that aim at reducing both inflation and interest rates on one hand and on the other hand, increasing both loans and advances as well as broad money supply so as to enhance improvement in the sector’s output.

Key words: Manufacturing Sector, Bank Credit, Cochrane-Orcutt.