Sectorial Allocation of Bank Credits and Economic Development in Nigeria

This study examines sectorial allocation of bank credits and economic development in Nigeria. The study made use of human development index as proxy for dependent variable measuring economic development while bank credits to public sector, manufacturing, agricultural, mining general commerce sector, real estate and construction, was used in the study as independent variables. All data were obtained from Central Bank of Nigeria statistical bulletin and index-mudi which span across 1985 to 2019. Data stationarity was ensured using the Augmented Dickey Fuller statistics, while the error correction model was applied to as the statistical tool for acceptance of hypothesis. The results of the analysis showed that bank credits to manufacturing, mining and general commerce sector contributed negatively to human development index while bank credit to public sector, real estate and agricultural sector contributed positively to human development index. The study also upholds the bank-based systems and that of the commercial bank theory. The current risky business environment is affecting banks’ ability to lend to the manufacturing, mining and general commerce sector which ought to drive development. This study recommends that monetary authorities should control key macro-economic factors; this will enable the banking sector to create more credit for the economy. Thereby enhancing investment and employment opportunities which on the other hand will boast economic development in the country.