Causal Relationship between Financial Structure and Economic Growth in Contemporary African Economy: A Case Study of Nigeria from 1990-2018 (Published)
This study examined financial structure and economic growth of contemporary African economies; evidence from Nigeria. The specific objectives of this study are to investigate the effect of financial structure in bank credit to the private sector ratio (BC), market capitalization ratio (MC), liquid liability ratio (LLR), turnover ratio (TR) and value of traded share (VTS) on economic growth variable in Gross Domestic Product (GDP). The study was anchored on bank based and market-based theory. The study used secondary data obtained from World Bank Data Atlas and subjected them to Granger Causality technique to test the interaction between independent variables and the dependent variable at the 5% level of significance. The findings show that financial structure in BC, MC, LLR, TR and VTS had no significant effect on GDP in the contemporary African economies. The result further discovered that there was absence of long run relationship in the study. Thus, the study concludes that financial structure does not have significant effect on economic growth in the contemporary African economies. Hence, the study recommends that financial structure should strengthen and enhance availability of money supply to key sector of the economy thereby improving economic growth by ensuring financial deepening within the economies and providing viable economic environment for financial enhancement to boost investment activities within the Nigerian economy.
Keywords: Bank credit, GDP, Market Capitalization, economic growth, financial structure
Differenced Model Analysis of Sectorial Bank Credits-Economic Performance Nexus: The Case of Nigeria (1987-2016) (Published)
This study examined the nexus of sectoral allocation of bank credits and economic performance in Nigeria from 1987 to 2016 by a differenced model analysis. The study employed secondary data sourced from the Central Bank of Nigeria (CBN) Statistical Bulletin. The ordinary least squares (OLS) method of regression analysis was adopted at both level series and first difference models to ensure stationarity of data and eliminate serial correlation which was tested using the Breush-Godfrey serial correlation LM test in order to ensure that the results obtained were not spurious. The results revealed: (i) positive and significant relationship between bank credits to the agricultural sub-sector and economic performance; (ii) positive but insignificant relationship between bank credits to the real estate and construction sub-sector and economic performance; (iii) positive but insignificant relationship between bank credits to the mining sub-sector and economic performance; (iv) negative but insignificant relationship between bank credits to the manufacturing subsector and economic performance; and (v) bank credits to the overall production sector (comprising the agricultural, real estate and construction, mining, and manufacturing sub-sectors) of the economy did not significantly contribute to economic performance. The study, therefore, recommended that more attention should be given to the agriculture sub-sector in terms of the amount of loans granted; as well as the assistance given to the subsector to encourage more participation and greater output so that it will continue to contribute more to economic growth in Nigeria.
Keywords: Bank credit, Differenced Model Analysis, Economic Performance, Sectoral Allocation
IMPACT OF BANK CREDIT ON ECONOMIC GROWTH IN NIGERIA: APPLICATION OF REDUCED VECTOR AUTOREGRESSIVE (VAR) TECHNIQUE (Published)
This study investigates the impact of bank credit on economic growth in Nigeria applying the reduced form of vector autoregressive (VAR) technique using time series data from 1960 to 2011. Current gross domestic product (GDP) is the dependent variable and proxy for economic growth while bank credit to the private sector (CPS) to GDP ratio and broad money (M2) to GDP ratio were proxies for financial indicator and financial depth respectively. We tested the stationarity of the variables using the Augmented Dickey-Fuller (ADF) and Phillips Perron (PP) unit root tests. All the variables were integrated of order one i.e., I (1). A major finding is that there is a significant positive relationship between bank credit to the private sector, broad moneyand economic growth. The past values of all the variables were significant in predicting their current values. This result implies that the bank consolidation and recapitalization exercise was a welcome development and further steps should be taken to ensure the stability of the banking sector.
Keywords: Bank credit, Broad money, Vector Autoregression, economic growth
IMPACT OF BANK CREDIT ON ECONOMIC GROWTH IN NIGERIA: APPLICATION OF REDUCED VECTOR AUTOREGRESSIVE (VAR) TECHNIQUE (Review Completed - Accepted)
This study investigates the impact of bank credit on economic growth in Nigeria applying the reduced form of vector autoregressive (VAR) technique using time series data from 1960 to 2011. Current gross domestic product (GDP) is the dependent variable and proxy for economic growth while bank credit to the private sector (CPS) to GDP ratio and broad money (M2) to GDP ratio were proxies for financial indicator and financial depth respectively. We tested the stationarity of the variables using the Augmented Dickey-Fuller (ADF) and Phillips Perron (PP) unit root tests. All the variables were integrated of order one i.e., I (1). A major finding is that there is a significant positive relationship between bank credit to the private sector, broad money and economic growth. The past values of all the variables were significant in predicting their current values. This result implies that the bank consolidation and recapitalization exercise was a welcome development and further steps should be taken to ensure the stability of the banking sector.
Keywords: Bank credit, Broad money, Vector Autoregression, economic growth