Public Sector Credit and Economic Growth in Nigeria: An ARDL Approach

Abstract

This study investigates the link between public sector credit and economic growth in Nigeria using the ARDL approach. The empirical analysis is based on annual time series data from 1985 through 2016. While credit to central government is used to proxy public sector credit, economic growth is measured by real GDP. Further, inflation, credit to private sector, and interest rate covering are used as control variables. The results suggest that long run relationship exit between public sector credit and economic growth, controlling for the influence of credit to private sector, interest rate and inflation. There is therefore, need for policy makers to pursue policies that would strengthen the capacity of the banking sector and the financial market to give long-term credit to the public sector so as to promote economic growth in the long run.