Bank Liquidity and Economic Growth of Nigeria

Abstract

This study was carried out to determine the effect of bank liquidity on the economic growth of Nigeria. Consequently, three hypotheses were designed to guide the researchers and data were drawn from the Central Bank of Nigeria (CBN) statistical bulletin which covered a thirty three (33) years period between 1980 to 2013. The hypotheses were tested using ordinary least square regression analysis and the econometrics co integration test. The result revealed that; there is a positive and significant relationship between total bank credit ratio and economic growth of Nigeria; there is a positive and significant relationship between total bank deposits and gross domestic product of Nigeria; a negative but significant relationship exist between deposit credit ratio and economic growth of Nigeria. Based on the results, it was recommended that government should motivate banks to grant more loans and advances to the economy; laws should be instituted to prevent the diversion of loans to non-productive sectors of the economy; the monetary authorities should encourage the real sectors of our economy such as the agricultural and industrial sectors of Nigeria.

Keywords: Bank deposits; Bank liquidity; Deposit credit ratio Economic growth; Gross domestic product; Loans and advances; Loan ratios; Total bank credit ratio; Total bank deposit.