Private Sector Credit Provision in Periods of Fluctuating Capital Inflows in Nigeria: Does each Regime Change Influence Credit Provision Differently?

Innocent Chile Nzeh, Benedict I. Uzoechina, Millicent Adanne Eze, Chika P. Imoagwu and Ozoh Joan Nwamaka
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Innocent Chile Nzeh: Department of Economics, Renaissance University, Ugbawka, Enugu State, Nigeria
Benedict I. Uzoechina: Department of Economics, Nnamdi Azikiwe University, Awka, Anambra State, Nigeria
Millicent Adanne Eze: School of Business and Social Sciences, Abertay University, Dundee, United Kingdom
Chika P. Imoagwu: Department of Economics, Nnamdi Azikiwe University, Awka, Anambra State, Nigeria
Ozoh Joan Nwamaka: Department of Economics, Nnamdi Azikiwe University, Awka, Anambra State, Nigeria

International Journal of Research and Innovation in Social Science, 2022, vol. 6, issue 1, 98-113

Abstract: Our study aims to find the link between capital inflows and credit to private sector over a period of 2010M01-2021M08 and to identify if the behavior of banks’ credit in each regime differ. Under the framework of ARDL, in the first sub-sample, findings show that capital inflows negatively impacts on credit to private sector in the short-run, while in the long-run, the impact is positive though not significant. The study also finds that the interaction of capital inflows with the dummy variable leads to a positivesignificant impact of capital inflows on credit to private sectorin the short-run. In the second sub-sample, findings show that the impact of capital inflows on credit to private sector is positive but not significant both in the short-run and in the long-run. However, when capital inflows interact with the dummy variable, the impact on credit to private sector is negative and significant in both the short and long-run. Consequently, we recommend that different policy measures should be adopted to suit different shocks to the macroeconomic environment.

Date: 2022
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