Bank lending to industrial sector and economic development of Nigeria

Abstract

This study examined bank credit to the different segments of the industrial sector in the economic development of Nigeria. The specific objectives are to examine the impact of bank credit on agriculture, mining, quarrying, manufacturing, and government on economic development (HDI) in Nigeria. The study was anchored on the pecking order theory and Central Bank of Nigeria (CBN) statistical bulletin and World Bank Data Atlas report of various years from the data source which were subjected to the Auto Regressive Distributed Lag (ARDL) technique to test the interaction between independent variables and the dependent components in human development index at 5% level of significance. The findings revealed a short and long-run relationship. However, the individual short-run impact showed bank lending to the agriculture and government segment of the industrial sector showed a negative insignificant relationship with HDI. While bank credit to the manufacturing segment of the industrial sector significantly impacted HDI, bank credit to the mining and quarrying segment of the industrial sector showed an insignificant impact on HDI. Conclusively, bank lending to the different segments of the industrial sector has a short and long-run relationship but could not exact the necessary significant impact on the economic development of Nigeria. Hence, the study recommends single-digit interest rates on loans and advances (credit) to segments of the industrial sector in agriculture, manufacturing, mining, quarrying, and government as applicable to developed economies of the world.