How Far Do Banks’ Intermediation Functions Influence Economic Growth In Nigeria?

Abstract

Motivated by the need to examine in the light of recent data, the nature of interrelationships between banks’ intermediation functions and Nigeria’s economic growth, this study employs time series data which were obtained from Central Bank of Nigeria’s Statistical Bulletin over the period 1981 to 2015. Stationarity, Multiple Regression, Johansen’s Cointegration, Error Correction Estimates and Pair-Wise Granger Causality tests were employed. The long run results represent improvements over the short-run estimates with credit to private sector and total deposit liabilities generated by Nigerian banks being causally dependent on her GDP, while credit to government sector was found  to be operating independent of the economy. In the light of the fact that the results represent an improvement over previous studies, it was  argued that greater adherence to market discipline Post 2005/06 Banking Sector Consolidation programme in Nigeria might have contributed to the improved results. Consequently, the study recommends sustenance of those adopted market disciplines, as well as more stringent enforcement of credit contracts to enable the operating banks recover more non-performing credits and invest same to enhance lendings to very efficient units in the private and public sectors of the Nigerian economy.

Keywords: Bank Deposit Liabilities, Credits to Private Sector, Credits to  Government Sector, Financial Intermediation, Economic Growth.