Effect of Bank Lending on Economic Growth in Nigeria

The study examined the impact of bank lending on economic growth in Nigeria from 1990 to 2023. In exploring the relationship between bank lending and economic growth, the study used annual data series sourced from the National Bureau of Statistics and Central Bank of Nigeria (CBN) Statistical Bulletin. Economic growth was measured using real gross domestic product, and bank lending and bank credit rate was used as independent variables, while controlling for the effect of money supply and inflation. In analyzing the data, the study used econometrics method, which include, unit root test, cointegration, and the autoregressive distributed lag (ARDL) method. The bounds test revealed that there is long run relationship between bank lending and economic growth. The ARDL results revealed that bank lending had positive and significant impact on economic growth in the long run. Bank credit rate had insignificant negative impact on economic growth in the long run. The study found that, money supply is positively related to economic growth, with the impact found to be significant. Additionally, the study found that inflation had negative and significant impact on economic growth. The study concludes that, bank lending is a key determinant of economic growth in Nigeria. The study recommends that, the regulatory authority, particularly the Central Bank of Nigeria (CBN), should through conventional and macroprudential means, influence the deposit money banks to increase lending to real sectors, most especially, the agriculture, manufacturing and service sectors of the Nigerian economy.