Impact of bank recapitalization on sectoral growth of the Nigerian economy: 1990-2020

Abstract

The study investigates the impact of bank recapitalization on sectoral growth of Nigerian economy. Since it is a long run impact, the study  examine a direct impact being bank credit and indirect impact being interest rate, inflation rate and exchange rate on the growth  of the economy sectors (agricultural, service and manufacturing industry sectors) between the period 1990 and 2020. The study  employed secondary data, which were obtained from Central Bank of Nigeria (CBN): CBN Economic and Financial Review Bulletin, CBN  Monthly Reports, CBN Annual Reports, and Statements of Account of various years. The data were subjected to unit root, co integration  and Error correction test. Augmented Dickey-Fuller (ADF) test were used to test whether the variables are non-stationary (unit root). An  Error correction mechanism was employed to ascertain the speed of adjustment from the short run equilibrium to the long run  equilibrium state, and while factors was determine using Ordinary least square (OLS). The result shows that bank credit is positively significant to the output growth of agricultural and service sectors but not to manufacturing sector. The above result supports  government policy on recapitalization and can suggest that continuous improvement or increase on bank capital base will strengthen the  banks, which will in turn aid in increase bank credit to economy sectors to enhance large production.