DEPOSIT MONEY BANK LENDING AND THE GROWTH OF THE PRIVATE SECTOR IN NIGERIA

ABSTRACT

This study is aimed at examining the effect of deposit money bank lending on the growth of private sector in Nigeria between 1995 and 2015. This study adopted the expost facto research design, in order to achieve the objectives stated in the study. Data used in the study was obtained through secondary sources from CBN statistical bulletin and, internet browsing, etc. The ordinary least square multiple regression technique was used to test the hypotheses stated in the study. From the findings, it was discovered that deposit money bank lending has a significant relationship with domestic private investments and manufacturing output as indicators of private sector growth. It was also realized that bank loans was statistically related with domestic private investments, while money supply indicated a statistically significant relationship with Manufacturing Output. It was concluded that deposit money bank lending has a significant positive effect on the growth of the private sector in Nigeria. Therefore, it was recommended that greater efforts should be structured toward increased short, medium and long term loans to private sector investors, as well as the manufacturing sector, agricultural sector and SMEs, as they constitute an integral part of the growth and transformation process of an economy like that of Nigeria.

CHAPTER ONE

INTRODUCTION

1.1       Background to the Study

In a modern economic system, there is a distinction between the surplus and deficit economic units and consequently a separation of the savings and investment mechanism. This has necessitated the existence of financial institutions whose jobs include the transfer or remission of funds from savers to investors (borrowers) (Levine, 1997). One of such institutions are the deposit money banks. Shittu (2012) opines that the intermediation roles of the deposit money banks place them in a position of trustees of the savings of the widely dispersed surplus economic units as well as the determinant of the rate and shape of the economic development.

The Nigerian financial system is dominated by the banking sector, especially the deposit money banks which has the largest share of deposits in the economy and also provides the foundation for the development of financial system. Deposit money banks are financial institutions that provide financial services, such as, acceptance of deposits, issuance of loans and advances, mortgage lending and other financial products, such as savings accounts, current accounts, certificates of deposit, among others. According to the mainstream theory, deposit money banks act as financial

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