The Effects of Bank Loans on Economic Growth in Nigeria (1981-2021)

Abstract

Countries desire economic growth due to its effects on the entire economy. Growth leads to reduced unemployment, increased income, and, all things being equal, improved standards of living. However, several countries have experienced weaker-than-expected growth in their economies. In this paper, I explored the relationship between bank credit and economic growth in Nigeria, and how bank credit can cause growth. The data sourced from the Central Bank of Nigeria statistical bulletin were tested for co-integration and unit root tests. The ordinary Least Squares Method was used to analyze the sourced data.  My data set was subjected to various statistical (First-Order) tests. Econometric (second-order) tests were also employed. The results showed a positive relationship between credits to both the manufacturing and public sectors of the economy and GDP. However, loans to the commercial and services sectors did not seem to generate the expected growth levels. The results suggest that more credit needs to be approved for the manufacturing sector of the Nigerian economy rather than the services sector.