Effects of Bank Credit on Industrial Performance in Nigeria

Abstract

This paper investigates the effect of bank loans and advances on industrial performance in Nigeria between 1975 and 2009. Co-integration and Error Correction technique was adopted for the analysis. The results showed that industrial performance co-integrated with all the identified explanatory variables. Industrial sector as dependent variable is proxied by real GDP, while Commercial Banks’ Loan and Advances to Industrial Sector (BLM), Aggregate Saving (SAV), Interest rate (INT), Inflation Rate (INF) are the independent variables. This suggests that the behavior of real Gross Domestic Product contributed by industrial sector in Nigeria is significantly explained by the commercial banks’ loan and advances to industrial sector, aggregate saving, interest rate and inflation rate. The findings implies that every action towards infrastructural development, strengthening of commercial banks, deregulation of interest rate, encouragement of saving among rural dwellers and reduction of inflation rate will boost the performance of industrial sector significantly.

Key words: Bank credit; Industrial performance; Nigeria