ABSTRACT
This study
examined the effect of bank credits on private domestic investment in Nigeria
for the period 1980 – 2019. The objectives of the study are to; examine the
impact of bank credits on private domestic investment in Nigeria. Determine
whether there are structural breaks on bank credits and private domestic
investment existing in Nigeria during the period of the study and ascertain the
shock impact of fluctuation in bank credits on private domestic investment
growth in Nigeria from 1980 – 2019. Secondary time series data were used to
carry out the empirical analysis. The study employed Vector Error Correction Model
(VECM), Chow test, impulse response analysis in VAR model, Augmented Dickey
Fuller (ADF) and Philips-Perron (PP) tests, co-integration test and Granger
Causality approach. With the above econometric and statistic techniques
conducted, it was observed that bank credit to private sector do have
significant impact on private domestic investment in Nigeria. There is
significant structural breaks on bank credit and private domestic investment
existing in Nigeria during the period of the study. Fluctuations in bank
credits does not significantly affect shock to private domestic investment
growth in Nigeria during the period of study 1980 – 2019. The results revealed
a bi-directional and directional nature of causality relationship between the
variables in the model. These empirical results do exhibit evidence of
instability from the results estimated which implies the presence of structural
breaks that occurred during this period of 1990 – 2000. One per cent increase
in credit to private sector (CPS), interest rate (INTR) and public investment
(PUI) in the long run will lead to (7%, 4% and 16%) increase in private
domestic investment (PDI) respectively in Nigeria during the periods of the
study. Meanwhile, one per cent increase in inflation rate (IFR) and exchange
rate (EXCR) in the long run will lead to (9% and 5%) decrease on private
domestic investment (PDI) respectively in Nigeria during the periods of the
study. Based on these findings, the study recommended: direct manipulation of
interest rates other than money supply should be a better monetary policy tool
to impact on the real sectors private domestic investment (PDI) of the economy.
More emphasis should be placed on the use of interest rate, inflation rate and
exchange rate since it can significantly influence investment in Nigeria. The
country should learn how to develop credit policy with an average and
attractive interest rate that will encourage investors to borrow money and as
well give access to lenders (banks) to get their borrowed money back as at when
due. The Nigerian government should create an enabling environment by ensuring
security for the growth of the economy because no economy can grow her
investment in the presence of insecurity. This gives room for instability and
frustration in investment and economic growth.
-- (2023). Bank Credits And Private Domestic Investment In Nigeria . Mouau.afribary.org: Retrieved Sep 08, 2024, from https://repository.mouau.edu.ng/work/view/bank-credits-and-private-domestic-investment-in-nigeria-7-2
--. "Bank Credits And Private Domestic Investment In Nigeria " Mouau.afribary.org. Mouau.afribary.org, 22 Jun. 2023, https://repository.mouau.edu.ng/work/view/bank-credits-and-private-domestic-investment-in-nigeria-7-2. Accessed 08 Sep. 2024.
--. "Bank Credits And Private Domestic Investment In Nigeria ". Mouau.afribary.org, Mouau.afribary.org, 22 Jun. 2023. Web. 08 Sep. 2024. < https://repository.mouau.edu.ng/work/view/bank-credits-and-private-domestic-investment-in-nigeria-7-2 >.
--. "Bank Credits And Private Domestic Investment In Nigeria " Mouau.afribary.org (2023). Accessed 08 Sep. 2024. https://repository.mouau.edu.ng/work/view/bank-credits-and-private-domestic-investment-in-nigeria-7-2