Sectorial Allocation of Bank Credit and the Performance of the Nigerian Economy

ABSTRACT
The study investigates the impact of the sectoral allocation of bank credit on the
performance of the Nigerian economy using annual time series data from 1990
to 2022. The variables adopted in this study for measuring sectorial allocation
of bank credit where; bank credit to the production sector, bank credit to general
commerce sector, bank credit to service sector and bank credit to other sectors.
Gross domestic product was used to measure the economic growth in Nigeria.
Time series data used for the study were obtained mainly from the Central Bank
of Nigeria Statistical Bulletin 2021 edition amongst other sources. It was
discovered that bank credit to the production sector exerts a positive and
significant relationship with gross domestic product, bank credit to the service
sector shows a negative and insignificant relationship while, bank credit to the
general commerce sector and bank credit to other sector exerts a positive and
insignificant relationship with gross domestic product. The study recommends
that policies be formulated to facilitate easier access to credit for the production
sector. This can be done through interest rate adjustments, relaxed collateral
requirements, or specific loan programs tailored for businesses in the production
sector. Also, it is necessary for the government and affected institutions to
explore and encourage alternative investment channels for businesses instead of
solely relying on bank credit.