Further Empirical Examination on Determinants of Bank Credit Growth in Nigeria: A Supply Side Approach

Abstract

This study examined and carried out further examination on the determinants of aggregate bank credit growth in Nigeria from the period of 1984 to 2020. It specifically investigates the determinants of bank credit growth to private and public sectors of the Nigerian economic growth performance. The study employed econometric approach to further carried out the examination on the determinants of aggregate bank credit growth in Nigeria by applying the estimation techniques of Augmented Dickey Fuller (ADF)/unit root test, correlation analysis and ordinary fitted regression analysis. The study addressed broad money supply, monetary policy rate, inflation rate, exchange rate and real gross domestic product as explanatory variables while aggregate bank credit to private and public sectors was regressed as the explained variables. The data used for the analysis were gathered from secondary sources of Nigeria Central Bank Statistical Bulletin and National Bureau of Statistics.The findings revealed that monetary policy rate, money supply and real gross domestic product have significant and positive effects on aggregate credit to private and public sectors (credit growth) aside exchange and inflation that have a negative and insignificant effect. The effect of these is that macroeconomic variables used are the true parameter of measuring aggregate bank credit growth in Nigeria. The short run result and regression results validates and support the influence of aggregate bank credit as a major determinant of credit supply via financial and non financial intermediaries. While the financial reforms and bank reforms also strengthen the banking sector towards meeting their obligations towards investment proliferation and economic growth performance.

JEL Classification Numbers: E44, E51, G21

Keywords: Bank credit, Aggregate credit to private and public sector, SMEs, Nigeria

DOI: 10.7176/RJFA/12-11-02

Publication date:June 30^th 2021