BANK CREDIT, MONEY SUPPLY AND PERFORMANCE OF THE NIGERIAN ECONOMY, 1980-2020

Abstract

This study investigated the nexus between bank credit, money supply and performance of the Nigerian economy. Data on bank credit to the public sector, bank credit tothe private sector, broad money supply were the independent variables while real gross domestic product was used as the dependent variable. The data were analysed using the Error Correction Model (ECM) technique. The findings revealed that bank credit to the private sector increased Nigeria’s economic growth significantly while bank credit to the public sector hadnegative effect on growth but not significant. The study concluded that private sector utilizes bank credit more than the public sector. However, money supply showed signs of shrinking the economy mainly due to the irregular supply and the injection of the monies into consumptionspending rather than growth-driven and productive spending. It was recommended that more credit be granted to the private sector by banks since the sector showed more signs of utilizing credit towards the growth of the economy. Also, banks should monitor credit granted to the public sector for probity as well as identify growth inducing public sector for credit advancement so as to engender growth of the economy.