Bank Credit and Private Sector Investment: Evidence from Nigeria

Vincent A. Onodugo, Oluchukwu F. Anowor, Nnaemeka O. Ukweni and Francis O. Ibiam

International Journal of Management Sciences, 2014, vol. 3, issue 2, 82-92

Abstract: There has been a shift by most developing countries away from public sector centrally planned economy to private sector driven economy. This move is as a result of the fact that the public sector driven economy resulted in resource inefficiency, poor service delivery and for the most part, steeped in corrupt practices. This move to private sector, through the encouragement of small and medium scale businesses (SME) is fraught with challenges due to paucity of needed credits from commercial banks and infrastructural facilities. This study seeks specifically to examine the impact of bank credit on private sector investment in Nigeria. The study was approached using Ordinary Least Square (OLS) tool to construct an econometric model. The key explanatory variables that impact on private sector investment used in this study are: Banks Loans and Advances (BLA), Real Gross Domestic Product (GDP), Interest Rate (INT) and Foreign Direct Investment (FDI). A stationarity test was carried out using the Augmented Dickey-Fuller (ADF) test and stationarity was found at first difference at 5% level of significance. The Johansen-Juselius co-integration technique was also employed in this study in assessing the co-integrating properties of the variables, especially in a multivariate context. The result of the test showed that for the period, 1980-2009, there was co-integrating relationships among variables suggesting long run relationship. The result of white hetroscedasticity test confirmed that the assumption of homoscedasticity was not violated. Informed by the findings, recommendation demands that credits to private investors in Nigeria should be encouraged and that interest rate management should be structured to enhance private investment.

Keywords: Private Investment; Banks Loans and Advances; Bank Credit; Interest Rate; Credit Policies (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (2)

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