Determinant of Private Sector Credit and Its Implication on Economic Growth in Nigeria: 2000-2017
Keywords:
Private Sector Credit, Money Supply, Economic Growth, Gross Domestic Product, Credit Supply
Abstract
The study examined the determinant of private sector credit and its implication on economic growth in Nigeria. The fluctuation in the supply of money and credit is the basic causal factor at work in cyclical process; when money supply falls, prices decrease, profit decrease, production activities become sluggish and production falls and when money supply expands, price rise, profit increase and the total output increases and finally growth takes place. The main objective of this study is to examine the relationship between Private Sector Credit and Gross Domestic Product. Data were obtained from Central Bank of Nigeria statistical bulletin. Simple regression analysis was used to achieve the stated objective. It was revealed in the determinant of credit supply equation 1 that there was significant relationship between Total credits to private sector and money supply in Nigeria. It was also discovered in the Private Sector Credit and Economic Growth Equation 2 that there was significant relationship between private sector credit and economic growth in Nigeria. The study therefore recommends that there should be persistence increase of money supply to Nigerian economy in order to increase the flow of credit to the real sector of the Nigerian economy, financial institutions should distribute more credit to the real sector for productive purposes in order to increase Gross domestic product.
References
Aduda J, Masila J M and Onsongo E N (2012), The determinants of stock market development : The case for the Nairobi stock exchange, International journal of humanities and social science, Vol 2, No 9.
Aliero H M, Abdullahi Y Z and Adamu N (2013), Private sector credit and economic growth nexus in Nigeria: An autoregressive Distributed lag Bound Approach, Mediterranean Journal of Social sciences, Vol 4 (1) p83.
Al-Malkawi. H. N. & Abdullah, N., (2011). Finance-Growth Nexus: Evidence from a Panel of MENA Countries. International Research Journal of finance and Economics, 63, 129-139
Anthony O (2012), Bank savings and bank credits in Nigeria: Determinants and Impacts on economic growth, International Journal of economics and financial issues, Vol 2 No 2, pp 357-372.
Arrellano M and Bond S (1991), Some tests of specification for panel data: Monte carlo evidence and an application to employment equations, review of economic studies, 58, 277-297.
Assefa M (2014), Determinants of growth in bank credit to the private sector in Ethiopia: A supply side approach, Research Journal of Finance and Accounting, Vol 5, NO.17.
Atif, and others, (2010). Trade Liberalisation, Financial Development and Economic Growth: Evidence from Pakistan (1980-2009). Journal of International Academic Research Vol.10, No.2, 30-37.
Atoyebi K O, Adekunjo F O, Kadiri K I and Falana A A (2012), The determinants of domestic private investment in Nigeria, Journal of humanities and social science, Vol 2, Issue 6, pp 46-54.
Backé, P. and Zumer, T. (2005), “Developments in Credit to the Private Sector in Central and Eastern European EU Member States: Emerging from Financial Repression - A Comparative Overview” Focus 2/05. Vienna: Oesterreichische Nationalbank. 83-109.
Baltagi. H. B (1995), Econometrics of Panel Data. Wiley
Cecchetti, S. G. & Kharroub, E., (2012). Reassessing the impact of finance on growth. BIS Working Papers, No 381.
Cecchetti, S. G. & Kharroub, E., (2012). Reassessing the impact of finance on growth. BIS Working Papers, No 381.
David A C, Mlachila M and Moheeput A (2014), Does openness matter for financial development in Africa, IMF working paper, WP/14/94.
econometric model using ARDL approach to cointegration, American Journal of social science, Vol 3, No 6.
Engle, R. F., & Granger C. W. J ., (1987). Cointegration and Error Correction: Presentation, Estimation, and Testing. Econometrica, 55, 251-276.
Enisan A A and Oni I O (2015), Determinants of bank credit growth in Nigeria 1980-2010, European Journal of sustainable development, 4,1, 23-30.
Frimpong J M and Marbuah G (2010), Determinants of private sector investment in Ghana: An ARDL approach, Journal of Poverty, Investment and Development European journal of social sciences, Vol 15 No 2.
Haas R TA and Lelyveld I P P (2002), Foreign bank penetration and private sector credit in central and Eastern Europe, De Nederlandsche Bank NV, Amsterdam.
Hofmann B (2001), Determinants of private sector credit in industrialized countries: Do property prices matter? Bank for International Settlemets, working paper No.8. International country risk guide (2014), Political risk services, Retrieved from: http://www.info.worldbank.org/governance/wgi/pdf/PRS (26 Novmber 2014)
Iqbal M Z, Ahmad N A and Hussain Z (2012), Impact of savings and credit on economic growth in Pakistan, Pakiastan Journal of social sciences, Vol 32, No 1 pp 39-48.
Kemal, A. R. , and others, (2007). Financial Development and Economic Growth: Evidence from Heterogeneous Panel of High Income Countries. The Lahore Journal of Economics, 12, 1-34.
King, R. G., & Levine, R., (1993). Finance and Growth: Shumpeter Might Be Right. Quarterly Journal of Economics, 108, 717-737.
Krause S and Rioja F (2006), Financial development and monetary policy efficiency, Department of economics, Georgia state university.
Levine, R., (1997). Financial Development and Economic Growth: Views and Agenda. Journal of Economic Literature, 35, 688-726.
Maddala, G.S., (1992). Introduction to Econometrics. Second Edition, Macmillan Publishing Company, New York
Maddala, S. G. and Kim, I., (1998) Unit Root, Cointegration and Structural Change. Cambridge University Press, Cambridge.
Mohamed, S. E., (2008). Finance-Growth Nexus in Sudan: Empirical Assessment Based On An Application of the Autoregressive Distributed Lag (ARDL) Model. Working Paper, No. API/WPS 0803, Arab Planning Institute, Kuwait.
Mutenheri E (2003), The determinants of corporate financial policy in Zimbabwe: Empirical evidence from company panel data, Lough Borough University, PhD thesis.
Nezakati H , Fakhreddin F and Vaighan B M (2011), Do local banks credits to private sector and domestic direct investments inflow affect FDI Inflow? (Malaysia evidence), World appliances sciences journal 15 (11): 1576-1583.
Okey M K N (2011), Institutional reforms, private sector and economic growth in Africa, UNU-WIDER
Osman E G A (2014), The impact of private sector credit on Saudi Arabia Economic growth (GDP): An
Pesaran, H. M., (1997). The Role of Economic Theory in Modeling the long-run. Economic Journal, 107, 178-191.
Pesaran, H. M., and Shin, Y., (1998). An Autoregressive Distributed Lag Modeling Approach to Cointegration Analysis. In: Storm, S. Editor, Econometrics and Economic Theory in the 20th Century, Centennial. Cambridge University Press, UK.
Pesaran, M. H. and others, (2001). Bounds testing approaches to the analysis of level relationship. Journal of Applied Econometrics , 16, 289 – 326.
Pesaran, M. H. ,and others, (1996). Testing for the Existence of a long-run Relationship. Department of APPLIED Economics, University of Cambridge, UK, DAE Working Papers , No 9622.
Pissarides F (2001), Financial structures to promote private sector development in south eastern Europe, European bank for reconstruction and development, UK, Working paper No 64.
Rachdi H and Mensi S (2012), Does institutions quality matter for financial development and economic growth nexus? Another look at the evidence from Mena countries, Economic research forum, WP 705.
Rashid H (2011), Credit to private sector, interest rate spread and volatility in credit flows: Do bank ownership and deposits matter? Economic and social affairs, DESA working paper No 105.
Raza S H, Shahzadi H and Akram M (2014), Exploring the determinants of financial development (using panel data on developed and developing countries), Journal of finance and economics Vol 2, No 5, pp 166-172.
Saito A T, Savoia J R F and Lazier I (2014), Determinants of Private Credit in OECD Developed, BRIC´s and LAC Countries, American international Journal of social science, Vol 3, No 3 Sharma P and Gounder N (2012), Determinants of bank credit in small open economies: The case of six pacific Island countries, Griffith business School, discussion paper No 2012-13.
Samargandi, N. and others, (2013). Financial development and economic growth in an oil-rich economy: The case of Saudi Arabia. Economics and Finance Working Paper Series, Brunel University London , Working paper No:12-13.
Schumpeter, J. A., (1912). The Theory of Economic Development. Harvard University press, Cambridge, MA.
Shijaku G and Kalluci I (2013), Bank credit to the private sector: The case of Albania, Bank of Albania, WP No 09
Sogut E (2008), The determinants of Financial development and private sector credits: Evidence from panel data, Middle East Technical University, Master’s thesis.
Takyi P O and Obeng C K (2013), Determinants of financial development in Ghana, international journal of development and sustainability, Volume 2, No 4(2013), pp 2324-2336.
Touny M A (2014), Macroeconomic determinants of banking sector development: A comparison study between Egypt and Saudi Arabia, Advances in management and applied economics, vol. 4, no. 3, 139 156.
Were M, Nzomoi J and Rutto N (2012), Assessing the Impact of Private Sector Credit on Economic Performance: Evidence from Sectoral Panel Data for Kenya, International Journal of economics and Finance, Vol 4, No 3. World development indicators 2013 report. Downloaded from: http://data.worldbank.org/data-catalog/world-development-indicators/wdi-2013 (December 10 2014)
Aliero H M, Abdullahi Y Z and Adamu N (2013), Private sector credit and economic growth nexus in Nigeria: An autoregressive Distributed lag Bound Approach, Mediterranean Journal of Social sciences, Vol 4 (1) p83.
Al-Malkawi. H. N. & Abdullah, N., (2011). Finance-Growth Nexus: Evidence from a Panel of MENA Countries. International Research Journal of finance and Economics, 63, 129-139
Anthony O (2012), Bank savings and bank credits in Nigeria: Determinants and Impacts on economic growth, International Journal of economics and financial issues, Vol 2 No 2, pp 357-372.
Arrellano M and Bond S (1991), Some tests of specification for panel data: Monte carlo evidence and an application to employment equations, review of economic studies, 58, 277-297.
Assefa M (2014), Determinants of growth in bank credit to the private sector in Ethiopia: A supply side approach, Research Journal of Finance and Accounting, Vol 5, NO.17.
Atif, and others, (2010). Trade Liberalisation, Financial Development and Economic Growth: Evidence from Pakistan (1980-2009). Journal of International Academic Research Vol.10, No.2, 30-37.
Atoyebi K O, Adekunjo F O, Kadiri K I and Falana A A (2012), The determinants of domestic private investment in Nigeria, Journal of humanities and social science, Vol 2, Issue 6, pp 46-54.
Backé, P. and Zumer, T. (2005), “Developments in Credit to the Private Sector in Central and Eastern European EU Member States: Emerging from Financial Repression - A Comparative Overview” Focus 2/05. Vienna: Oesterreichische Nationalbank. 83-109.
Baltagi. H. B (1995), Econometrics of Panel Data. Wiley
Cecchetti, S. G. & Kharroub, E., (2012). Reassessing the impact of finance on growth. BIS Working Papers, No 381.
Cecchetti, S. G. & Kharroub, E., (2012). Reassessing the impact of finance on growth. BIS Working Papers, No 381.
David A C, Mlachila M and Moheeput A (2014), Does openness matter for financial development in Africa, IMF working paper, WP/14/94.
econometric model using ARDL approach to cointegration, American Journal of social science, Vol 3, No 6.
Engle, R. F., & Granger C. W. J ., (1987). Cointegration and Error Correction: Presentation, Estimation, and Testing. Econometrica, 55, 251-276.
Enisan A A and Oni I O (2015), Determinants of bank credit growth in Nigeria 1980-2010, European Journal of sustainable development, 4,1, 23-30.
Frimpong J M and Marbuah G (2010), Determinants of private sector investment in Ghana: An ARDL approach, Journal of Poverty, Investment and Development European journal of social sciences, Vol 15 No 2.
Haas R TA and Lelyveld I P P (2002), Foreign bank penetration and private sector credit in central and Eastern Europe, De Nederlandsche Bank NV, Amsterdam.
Hofmann B (2001), Determinants of private sector credit in industrialized countries: Do property prices matter? Bank for International Settlemets, working paper No.8. International country risk guide (2014), Political risk services, Retrieved from: http://www.info.worldbank.org/governance/wgi/pdf/PRS (26 Novmber 2014)
Iqbal M Z, Ahmad N A and Hussain Z (2012), Impact of savings and credit on economic growth in Pakistan, Pakiastan Journal of social sciences, Vol 32, No 1 pp 39-48.
Kemal, A. R. , and others, (2007). Financial Development and Economic Growth: Evidence from Heterogeneous Panel of High Income Countries. The Lahore Journal of Economics, 12, 1-34.
King, R. G., & Levine, R., (1993). Finance and Growth: Shumpeter Might Be Right. Quarterly Journal of Economics, 108, 717-737.
Krause S and Rioja F (2006), Financial development and monetary policy efficiency, Department of economics, Georgia state university.
Levine, R., (1997). Financial Development and Economic Growth: Views and Agenda. Journal of Economic Literature, 35, 688-726.
Maddala, G.S., (1992). Introduction to Econometrics. Second Edition, Macmillan Publishing Company, New York
Maddala, S. G. and Kim, I., (1998) Unit Root, Cointegration and Structural Change. Cambridge University Press, Cambridge.
Mohamed, S. E., (2008). Finance-Growth Nexus in Sudan: Empirical Assessment Based On An Application of the Autoregressive Distributed Lag (ARDL) Model. Working Paper, No. API/WPS 0803, Arab Planning Institute, Kuwait.
Mutenheri E (2003), The determinants of corporate financial policy in Zimbabwe: Empirical evidence from company panel data, Lough Borough University, PhD thesis.
Nezakati H , Fakhreddin F and Vaighan B M (2011), Do local banks credits to private sector and domestic direct investments inflow affect FDI Inflow? (Malaysia evidence), World appliances sciences journal 15 (11): 1576-1583.
Okey M K N (2011), Institutional reforms, private sector and economic growth in Africa, UNU-WIDER
Osman E G A (2014), The impact of private sector credit on Saudi Arabia Economic growth (GDP): An
Pesaran, H. M., (1997). The Role of Economic Theory in Modeling the long-run. Economic Journal, 107, 178-191.
Pesaran, H. M., and Shin, Y., (1998). An Autoregressive Distributed Lag Modeling Approach to Cointegration Analysis. In: Storm, S. Editor, Econometrics and Economic Theory in the 20th Century, Centennial. Cambridge University Press, UK.
Pesaran, M. H. and others, (2001). Bounds testing approaches to the analysis of level relationship. Journal of Applied Econometrics , 16, 289 – 326.
Pesaran, M. H. ,and others, (1996). Testing for the Existence of a long-run Relationship. Department of APPLIED Economics, University of Cambridge, UK, DAE Working Papers , No 9622.
Pissarides F (2001), Financial structures to promote private sector development in south eastern Europe, European bank for reconstruction and development, UK, Working paper No 64.
Rachdi H and Mensi S (2012), Does institutions quality matter for financial development and economic growth nexus? Another look at the evidence from Mena countries, Economic research forum, WP 705.
Rashid H (2011), Credit to private sector, interest rate spread and volatility in credit flows: Do bank ownership and deposits matter? Economic and social affairs, DESA working paper No 105.
Raza S H, Shahzadi H and Akram M (2014), Exploring the determinants of financial development (using panel data on developed and developing countries), Journal of finance and economics Vol 2, No 5, pp 166-172.
Saito A T, Savoia J R F and Lazier I (2014), Determinants of Private Credit in OECD Developed, BRIC´s and LAC Countries, American international Journal of social science, Vol 3, No 3 Sharma P and Gounder N (2012), Determinants of bank credit in small open economies: The case of six pacific Island countries, Griffith business School, discussion paper No 2012-13.
Samargandi, N. and others, (2013). Financial development and economic growth in an oil-rich economy: The case of Saudi Arabia. Economics and Finance Working Paper Series, Brunel University London , Working paper No:12-13.
Schumpeter, J. A., (1912). The Theory of Economic Development. Harvard University press, Cambridge, MA.
Shijaku G and Kalluci I (2013), Bank credit to the private sector: The case of Albania, Bank of Albania, WP No 09
Sogut E (2008), The determinants of Financial development and private sector credits: Evidence from panel data, Middle East Technical University, Master’s thesis.
Takyi P O and Obeng C K (2013), Determinants of financial development in Ghana, international journal of development and sustainability, Volume 2, No 4(2013), pp 2324-2336.
Touny M A (2014), Macroeconomic determinants of banking sector development: A comparison study between Egypt and Saudi Arabia, Advances in management and applied economics, vol. 4, no. 3, 139 156.
Were M, Nzomoi J and Rutto N (2012), Assessing the Impact of Private Sector Credit on Economic Performance: Evidence from Sectoral Panel Data for Kenya, International Journal of economics and Finance, Vol 4, No 3. World development indicators 2013 report. Downloaded from: http://data.worldbank.org/data-catalog/world-development-indicators/wdi-2013 (December 10 2014)
Published
2019-03-26
How to Cite
Gbenga, O., James, S. O., & Adeyinka, A. J. (2019). Determinant of Private Sector Credit and Its Implication on Economic Growth in Nigeria: 2000-2017. American Economic & Social Review, 5(1), 10-20. https://doi.org/10.46281/aesr.v5i1.242
Section
Research Paper/Theoretical Paper/Review Paper/Short Communication Paper
Copyright (c) 2019 Olorunmade Gbenga,Samuel Olusegun James,Adewole Joseph Adeyinka
This work is licensed under a Creative Commons Attribution 4.0 International License.
American Economic & Social Society is licensed under a 