DEPOSIT MONEY BANK CREDIT AND ECONOMIC GROWTH IN NIGERIA (2006-2015)

Banking and Finance

The study examined the relationship between deposit money bank credit and economic growth in Nigeria. The fluctuation in the bank 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 objective of this study is to examine the determinants of Deposit Money bank credit in the Nigerian Banking System and to assess the impact of Deposit Money Bank Credits on economic growth in Nigeria. Secondary data was sourced from CBN Statistical Bulletin. The study employed Multiple Regression Analysis to present the result of the data collected. It was revealed in equation I that there exists a positive or strong correlation between the dependent variable (Total Bank Credit) and independent variable (Cash Reserve Ratio, Liquidity Ratio, Deposit Rate, Lending Rate). Also, the relationship between the dependent and independent variables was statistically significant at 5%. In equation II, there exist a positive or strong correlation between the dependent variable (GDP) and independent variable (bank credit, Interest rate/Lending rate, inflation rates). Also, the relationship between the dependent and independent variables was statistically significant at 5%. The study therefore recommends that there is need to strengthen the supervisory framework to curb tendencies for rent seeking behaviour of banks management. There is need to strengthen the overall financial system in which the banking sector operates. Government has to give top priority to pricing system in order to drastically reduce the rate of inflation to global average.

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