Impact of Deposit Money Bank Credits on Economic Growth of Nigeria

ABSTRACT

This work is based on the impact of deposit money bank credits on Nigeria economic growth. The main objective of this study is; to ascertain the impact of deposit money bank credits on economic growth of Nigeria (1981-2016). A model was constructed to incorporate real gross domestic product (RGDP) as the dependent variable proxy of economic growth, commercial bank credit (CBC) and interest rate (INTR) as the independent variables and tested using the ordinary least-square (OLS) techniques. The empirical result shows that commercial bank credit and interest rate have negative relationship and insignificant impact on the economic growth in Nigeria. From the granger causality test result, inflation rate and interest rate have no causal relationship with real gross domestic product in Nigeria. Also no causal relationship exist between INTR and RGDP, finally no causal relationship exist between commercial bank credit (CBC) and interest rate (INTR) Based on the result, the researcher recommends that the Central Bank of Nigeria and other monetary authorities should reduce the interest rate being charge on loans borrowed from the commercial banks through the reduction of bank rate and other deposit requirements of the commercial banks in order to make funds available to the potential investors which will increase the national output though their production.