The Impact of Sectoral Bank Lending on Economic Growth in Nigeria

Following the unresolved scholarly debates on finance-growth nexus, this thesis contributes to existing knowledge by building on the work of Odedokun (1996). In this regard, this thesis provides an alternative approach to investigate the impact of bank lending on economic growth from the sectoral perspective using aggregated data or sectors and disaggregated data or sub-sectors for the longitudinal timespan 1961 to 2017, in Nigeria. This study adopts the bounds testing approach to investigate long-run relationship between the variables, and further applies ARDL-ECM and VAR models, based on the outcome of the bounds test. From the aggregated data or sectors perspective, the research findings show that there is no positive and statistically significant relationship between sectoral bank lending and economic growth in Nigeria. Additionally, the Wald test shows existence of neutrality hypothesis between sectoral bank lending and economic growth in Nigeria. From the disaggregated data or sub-sectors perspective, real estate and construction, and transport and communication sub-sectors show positive and statistically significant relationship with economic growth in Nigeria, in the long run. Manufacturing, and personal and professional sub-sectors show positive and statistically significant relationship with economic growth in Nigeria, in the short run. The Wald test for disaggregated data shows that growth in labour Granger causes economic growth only in the production sector, while proxies of economic growth Granger cause economic growth in services and general commerce models. Additionally, this study reveals feedback hypothesis between agriculture, forestry and fishery sub-sector and economic growth in Nigeria. However, manufacturing; transport and communication and credit to financial institutions sub-sectors show finance-led growth view/supply-leading hypothesis, while personal and professional sub-sector shows growth-led finance/demand following hypothesis.