International Journal of Economics, Commerce and Management BANK CREDIT AND MANUFACTURING SECTOR GROWTH IN NIGERIA (1990-2017): A CAUSALITY INVESTIGATION

Priye Andabai, Werigbelegha, Gbalam Peter
The study examined a causality investigation of bank credit and manufacturing sector growth in Nigeria for the period of 27-years, 1990-2016. Secondary data were used and obtained from Central Bank of Nigeria Statistical Bulletin. Five variables were employed for this study. These are manufacturing Sector Output proxied for manufacturing Sector Growth as the dependent variable; whereas, Broad Money Supply, Credit to the Private Sector, Interest Rate and Inflation Rate as the explanatory
more » ... s. The stationarity test revealed that all the variables of the study are stationary at first difference. Johansen co-integration test showed the existence of at least one co-integrating relationship at 5% level of significance. Vector Error Correction Model revealed that bank credit had no short-run equilibrium significant relationship with manufacturing sector growth in Nigeria. Causality test indicated that bank credit had no causal relationship with manufacturing sector growth in Nigeria. The study concluded that bank credit had not significantly contributed to manufacturing sector growth in Nigeria. The study recommended that for the economy to grow, the manufacturing sector should be encouraged in form of concessional and reduced interest rate. The study suggested that regulatory authorities should stabilize the interest rate which is capable of ensuring price stability and maintaining inflation to a single digit. This may build confidence in the banking institutions and will enable them to introduce innovations to boost manufacturing sector output in the economy.