Impact of financial intermediation by deposit money banks on the real sector of the Nigerian economy (1989 – 2021)

Abstract

The empirical paper is an impact assessment of financial intermediation of the Deposit Money Banks (DMBs) on the growth of the real sector of the Nigerian economy. The theoretical basis for the study was obtained through review of related literature. The study employs unit root test, co-integration and Vector Error Correction (VEC) model using real GDP growth rate as the dependent variable and credits to private sector (CPS), average manufacturing capacity utilization (AMCU) and inflation rate (INFR) as independent variables from 1989-2021. The research finding established that credit to private sector contributes significantly to real sector growth in Nigeria. The study further found that both the average manufacturing capacity utilization and inflation rate do exert a significant effect on real sector growth in Nigeria. The study recommends for a sound public policies to stimulate the supply of basic infrastructure, reward DMBs for providing large loans to private sector, improve security of lives and properties and discipline monetary and fiscal policies in order to enhance real sector growth.