The Impact of Bank Credits on the Growth of the Manufacturing Sectors in Nigeria

Abstract

Insufficient capital has been considered as one of the factors affecting the performance of the real sector of the economy. The financial institutions that stand in the position of granting loans and advances try to shun lending to these sectors because they believe it could be detrimental to their motive of making profit. This paper therefore investigates the impact of bank credits on the performance of manufacturing sector in Nigeria for the period of 11years (i.e. 2006-2016). Secondary source and time series data were used. The data were sourced from Central Bank of Nigeria (CBN) statistical bulletin of 2016.The variables considered are manufacturing output share of Gross Domestic Product as dependent variable and bank credit to manufacturing sector, money supply as well as interest rate as explanatory variables. The data were analyzed using Ordinary Least Square (OLS) econometric technique with the aid Statistical Package for Social Sciences (SPSS). The findings show that bank credits to manufacturing sector and interest rate have insignificant impact on manufacturing output while money supply is statistically significant at 5% level of significance. The f-statistic result shows 41.43 with P. value of 0.000 which indicates that the joint variables of bank credits have significant impact on the performance of manufacturing sector in Nigeria for the period under review. The paper concluded that adequate lending to the manufacturing sector will facilitates the growth of the sector and the economy as a whole. The paper therefore recommended that the government should allocate more intervention funds to manufacturing sector in order to boost their contribution to the ailing Nigeria's Gross Domestic Product (GDP) and reduce unemployment rate in the country.