Impact Of Deposit Money Bank Credits On Economic Growth

This study examines the influence of deposit money bank credits on Nigeria’s economic growth. The primary objective is to investigate how deposit money bank credits impact Nigeria’s economic growth from 1981 to 2016. The study utilizes a model where real gross domestic product (RGDP) serves as the dependent variable, representing economic growth. The independent variables are commercial bank credit (CBC) and interest rate (INTR), and the analysis employs ordinary least squares (OLS) techniques.

The empirical findings indicate a negative and statistically insignificant relationship between commercial bank credit and interest rates with economic growth in Nigeria. According to the Granger causality test, there is no causal relationship between inflation rate and interest rate with real gross domestic product (RGDP) in Nigeria. Furthermore, no causal relationship exists between interest rates and RGDP, and similarly, there is no causal relationship between commercial bank credit (CBC) and interest rate (INTR).

Based on these results, the researcher recommends that the Central Bank of Nigeria and other monetary authorities should consider reducing interest rates charged on loans from commercial banks by lowering bank rates and adjusting deposit requirements. This adjustment aims to increase fund availability for potential investors, thereby boosting national output through increased production