TITLE:
Commercial Bank Lending and Economic Growth—The Nigerian Experience (1970-2013)
AUTHORS:
Joseph Olusegun Ajibola
KEYWORDS:
Economic Growth, Non-Oil GDP, Commercial Bank, Bank Credit
JOURNAL NAME:
Open Access Library Journal,
Vol.2 No.5,
May
7,
2015
ABSTRACT:
This paper examines the effects of commercial bank lending on economic growth
in Nigeria for the period 1970-2013, using the rise in non-oil GDP as a measure
of economic growth. The theoretical underpinning of the role of commercial bank
lending in economic growth is based on the combination of the quantity theory of
money and aggregate production function. To determine the relationship between the two variables, therefore, a preliminary
co-integration analysis (unit root test) was carried out on the variables
at levels. Also, the relative rates of changes were statistically determined for
the variables and multiple regressions were carried out for the variables with
the basic regression model defined as Yr = a1＋a2Lr＋a3Br＋a4Br-1＋e1. The study
showed an increasing importance of commercial bank lending to economic growth in
Nigeria, more so that commercial banks accounted for over 60% of total loans provided
by the banking system for the period. The linear regression model (OLS) revealed
a positive correlation between economic growth and commercial bank loans for one
year lagged period showing some slowness in the transmission mechanism between the
financial and the real sectors of the economy. The overall results therefore conform
to our a priori expectation that bank credit generally is an enabler for economic
growth, although at a fairly sluggish pace.