Impact of Bank Lending on Economic Growth in Nigeria: Autoregressive -Distributed Lag Model

The study examined the impact of bank lending on economic growth in Nigeria. The specific objectives were to: ascertain the impact of banks’ interest rate and aggregate bank credit on economic growth in Nigeria. This study used ex post-facto research design. The method of data analysis used are Augmented Dickey-Fuller Unit Root test statistic, Johansen Co-integration test, Autoregressive -distributed lag Model method and Histogram Normality Test. The major findings of the study are that aggregate bank credit (BC) has positive and significant impact on economic growth in short run [t-statistics; 6.9881; P-value (0.0029) > significant value (0.05] but it was positive and significant impact on economic growth in long run [t-statistics; 4.9519; P-value (0.0029) > sig-value (0.05]; Bank interest rate has negative and insignificant impact on economic growth in short run [t-statistics; -1.2040; P-value (0.8400) > sig-value (0.05] but it was negative and significant impact on economic growth in long run [t-statistics; -6.2056; P-value (0.0088) > sig- value (0.05]. The study recommended that monetary authorities should review credit policies by regulating interest rate more and try to monitor how the rate is charge by different banks to enable the key economic sectors to increase output and their capacity utilization since interest rate increase in Nigeria affect the performance of key economic sectors.