Commercial Bank Credit Accessibility and Sectoral Output Performance in a Deregulated Financial Market Economy: Empirical Evidence from Nigeria Imoughele 1

Abstract

This study investigated the impact of commercial bank credit accessibility and sectoral output performance in Nigerian economy for the period which spanned between 1986 and 2010. An augmented growth model was estimated via the Ordinary Least Square (OLS) techniques to ascertain the relationship between various commercial bank credits and sectoral output growth. The variables were tested for stationarity and co-integration analysis was also carried out using the Augmented Dickey-Fuller test. Also error correction test was performed. The study found that the various commercial bank credit supply and other included variables has a long run relationship with sectoral output performance i.e agricultural, manufacturing and services sector output and the main demand for credit facility in Nigeria is the manufacturing sector. The study also reveal that commercial bank credit has direct and insignificant impact on sectoral output performance but cumulative supply and demand for credit in the previous period has direct and significant impact on the growth of agriculture, manufacturing and the services sectors output. This finding confirms to the apriori expectation. This was attributed to the vital importance of credit facility as an input in the production process and persistent inflow to the manufacturing, Agriculture and services sectors have the capacity to induce the growth and development of the sectors. Total government expenditure has inverse and insignificant impact on sectoral output performance. The inverse nature of this variable indicates that there is a crowding out effect of government expenditure in the Nigeria manufacturing, agricultural, and services sectors while expansionary monetary policy in the previous period has direct and significant impact on the sector output performance. The implication of this is that consistent expansion of monetary policy which engenders supply and demand for commercial bank credit by the manufacturer, Farmer and services provider promote the sectors productivity. Human capital investment and interest rate has direct and insignificant impact on the sector output performance while inflationary rate has inverse and insignificant impact on the various sector performances.This implies that macroeconomic instability reduces sectoral output performance. The general lesson that emerges from this study is that continuous credit accessibility in a deregulated financial market economy has the capacity to induced the nation sectoral output performance which will promote economic growth and development when adequate monetary and fiscal policy are put in place to encourage the demand and supply of commercial bank credit to the real sector of the economy. Key word: Financial Market, Manufacturing, Agriculture, Services, Credit, Output, Commercial bank

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