Sectoral Allocation of Bank’s Credits and Economic Growth in Nigeria

Abstract

The study investigates the impact of sectoral allocation of Deposit Money Banks’ loans and advances on economic growth in Nigeria during intensive regulation, deregulation and guided deregulation regimes. Regression analysis of the ordinary least square method is performed for each of the three regimes. The results show that only the credit allocated to government, personal and professional have significant positive contributions on economic growth during the intensive regulation. However, bank credits generally do not contribute significantly to economic growth during deregulation. Introduction of guided deregulation appears to be a success as commercial bank’s loans and advances to production and other subsector are both positive and significant in determining growth. Based on the empirical findings, Nigerian deposit money banks should be more favourably disposed to extending more credits to production and other subsectors namely agriculture, manufacturing, mining and quarrying, real estate and construction, government, personal and professional at reasonable interest rate. Finally, monetary authorities should ensure the continuance of guided deregulation as opposed to intensive regulation or total deregulation.