Impact of Banks Credit on Output of Manufacturing Sector in Nigeria

Purpose: This study examined the impact of banks credit on output of the manufacturing sector in Nigeria. In specific term, it evaluated the impact of banks’ credit to the manufacturing sector, credit to the private sector, banks’ lending rate and financial sector development on output of the manufacturing sector in Nigeria. Design/Methodology/Approach: Data for the study were sourced via secondary obtained from Central Bank of Nigeria statistical bulletin between the periods 1986 to 2021, analysed with Autoregressive Distributed Lag (ARDL). Findings: The results indicated that banks’ credit to the manufacturing sector and financial sector development showed an insignificant positive relationship with output of the manufacturing sector while credit to the private sector indicated significant positive relationship. Banks’ lending rate depicted significant negative relationship with output of the manufacturing sector. Practical Implications: With these findings, the study revealed that the quantum of credit extended to the manufacturing sector is low. It was therefore suggested that pragmatic efforts are needed by the government in conjunction with the central bank of Nigeria to deepening the economy and ensure a reduction in the cost of lending to the manufacturing sector for more optimum output performance. Social Implications: A systemic effort should be made by the monetary authorities in the country, to develop the financial system and ensure that the lending rate on the key sectors of the economy is reduced to a single digit. Originality and Value: The study added to the retinue of literature by accessing the implication of bank credit on manufacturing sector output. It uses the contribution of manufacturing sector to the aggregate economy.