Commercial Bank Credit and Economic Growth in Nigeria: An Empirical Investigation

This study empirically investigates the effect of commercial bank credit on economic growth in Nigeria. Data were obtained from the Central Bank of Nigeria (CBN) Statistical Bulletin and World Bank Development Indicators. The study employs the Ordinary Least Squares (OLS) estimation technique after confirming stationarity using the Augmented Dickey–Fuller (ADF) test and long-run cointegration via the Johansen cointegration procedure. The dependent variable is Real Gross Domestic Product (RGDP), while the independent variables include commercial bank credit to the private sector (CPS), lending interest rate (INT), inflation rate (INF), and exchange rate (EXR). The results reveal that commercial bank credit has a positive and statistically significant effect on real GDP (β = 0.472, p < 0.01), confirming that credit expansion promotes economic growth. Lending interest rate and inflation exert significant negative effects on growth, while exchange rate depreciation has a moderate positive influence. The model explains approximately 95.8% of variations in economic growth (R² = 0.958), and all diagnostic tests confirm model reliability. The study concludes that an efficient, well-regulated, and productively oriented banking sector is indispensable for Nigeria's sustainable economic growth. Policy recommendations include interest rate reduction, improved sectoral credit allocation, and macroeconomic stabilisation

Commercial Bank Credit, Economic Growth, Financial Intermediation

1. Adeleke, A. I., & Akinola, G. O. (2018). Bank credit and economic growth in Nigeria: An empirical study (1981–2016). International Journal of Economics and Financial Issues, 8(4), 119–126. [Google Scholar] [Crossref]

2. Ademola, S. A., & Olatunji, T. E. (2022). Credit channel of monetary transmission and business cycles in Nigeria, 2000–2021. Nigerian Journal of Economic Studies, 14(2), 88–107. [Google Scholar] [Crossref]

3. Adusei, M. (2020). Bank credit and economic growth in Ghana: A long-run analysis (1990–2018). Journal of African Business, 21(3), 321–339. [Google Scholar] [Crossref]

4. Alege, P. O., & Ogun, T. P. (2020). Sectoral credit distribution and economic growth in Nigeria, 1990–2019. Journal of Development and Agricultural Economics, 12(1), 12–24. [Google Scholar] [Crossref]

5. Almeida, C., & Dias, J. (2022). Financial inclusion and growth in sub-Saharan Africa: A comparative panel study. African Development Review, 34(2), 209–225. [Google Scholar] [Crossref]

6. Ali, M., Iqbal, M., & Rehman, K. (2018). Bank credit and economic growth in Pakistan: ARDL bounds test approach (1980–2016). Pakistan Journal of Commerce and Social Sciences, 12(1), 118–132. [Google Scholar] [Crossref]

7. Arcand, J. L., Berkes, E., & Panizza, U. (2015). Too much finance? Journal of Economic Growth, 20(2), 105–148. [Google Scholar] [Crossref]

8. Beck, T., Demirguc-Kunt, A., & Levine, R. (2007). Finance, inequality and poverty: Cross-country evidence. Journal of Economic Growth, 12(1), 27–49. [Google Scholar] [Crossref]

9. Bernanke, B. S., & Blinder, A. S. (1988). Credit, money and aggregate demand. American Economic Review, 78(2), 435–439. [Google Scholar] [Crossref]

10. Bernanke, B. S., & Gertler, M. (1995). Inside the black box: The credit channel of monetary policy transmission. Journal of Economic Perspectives, 9(4), 27–48. [Google Scholar] [Crossref]

11. CBN. (2024). CBN Statistical Bulletin, 2024. Central Bank of Nigeria. [Google Scholar] [Crossref]

12. Cecchetti, S., & Kharroubi, E. (2012). Reassessing the impact of finance on growth (BIS Working Paper No. 381). Bank for International Settlements. [Google Scholar] [Crossref]

13. Cheng, X., & Degryse, H. (2016). Credit markets and economic growth in Asia. Economic Systems, 40(3), 477–490. [Google Scholar] [Crossref]

14. Eze, G. P., & Aluko, O. A. (2023). Non-performing loans, bank credit and economic growth in Nigeria, 2005–2022. Journal of Financial Regulation and Compliance, 31(4), 459–477. [Google Scholar] [Crossref]

15. Fowowe, B. (2017). Finance and growth in sub-Saharan Africa: Does quality of institutions matter? Economic Modelling, 60, 187–198. [Google Scholar] [Crossref]

16. IMF. (2022). Credit infrastructure and growth in emerging markets (IMF Working Paper WP/22/154). International Monetary Fund. [Google Scholar] [Crossref]

17. International Monetary Fund. (2024). The riskiness of credit origins and downside risks to economic activity (IMF Working Paper No. 24/72). Washington, DC: IMF. [Google Scholar] [Crossref]

18. International Monetary Fund. (2026). Financial inclusion, credit booms, and financial stability risk (IMF Working Paper No. 26/08). Washington, DC: IMF. [Google Scholar] [Crossref]

19. Gutiérrez, G., & Philippon, T. (2022). Investment-less growth: An empirical investigation. Brookings Papers on Economic Activity, Spring, 89–169. [Google Scholar] [Crossref]

20. Keynes, J. M. (1936). The general theory of employment, interest and money. Macmillan. [Google Scholar] [Crossref]

21. King, R. G., & Levine, R. (1993). Finance and growth: Schumpeter might be right. Quarterly Journal of Economics, 108(3), 717–737. [Google Scholar] [Crossref]

22. Levine, R. (2021). Finance, growth, and economic development: Reassessing the evidence. Journal of Economic Literature, 59(4), 1200–1245. [Google Scholar] [Crossref]

23. Levine, R. (2005). Finance and growth: Theory and evidence. In P. Aghion & S. Durlauf (Eds.), Handbook of Economic Growth, 1(1), 865–934. Elsevier. [Google Scholar] [Crossref]

24. Lucas, R. E. (1988). On the mechanics of economic development. Journal of Monetary Economics, 22(1), 3–42. [Google Scholar] [Crossref]

25. McKinnon, R. I. (1973). Money and capital in economic development. Brookings Institution. [Google Scholar] [Crossref]

26. Moyo, J., & Chisasa, J. (2019). Bank credit and economic growth in South Africa: An empirical investigation. Journal of Economics and Behavioral Studies, 11(1), 1–12. [Google Scholar] [Crossref]

27. NBS. (2024). Consumer Price Index Report, 2024. National Bureau of Statistics, Nigeria. [Google Scholar] [Crossref]

28. National Bureau of Statistics. (2025). Nigerian gross domestic product report (Q4 and full year 2024). Abuja, Nigeria. [Google Scholar] [Crossref]

29. Nnanna, O. J. (2019). Bank credit and economic growth: A VECM approach for Nigeria (1980–2017). Journal of Money, Investment and Banking, 45(2), 78–93. [Google Scholar] [Crossref]

30. Nwakanma, P. C., & Mgbaka, M. (2021). Commercial bank credit and economic growth in Nigeria. European Journal of Business and Management, 13(4), 32–41. [Google Scholar] [Crossref]

31. Nwosu, C. P., & Okafor, E. O. (2022). Commercial bank credit, interest rate and economic growth in Nigeria: ARDL bounds test evidence, 1990–2020. Cogent Economics & Finance, 10(1), 1–19. [Google Scholar] [Crossref]

32. Obamuyi, T. M., Oke, B. O., Shiro, A. A., & Adebusuyi, A. T. (2023). Effect of financial innovative payment systems on commercial banks' returns on assets and equity in Nigeria: An application of multi-criteria decision making methods. Journal of Economics and Management, 51(1), 141–163. [Google Scholar] [Crossref]

33. Obeng, K., & Mensah, E. (2021). Bank credit and economic growth: Panel ARDL evidence from East Africa, 1995–2019. Journal of African Economies, 30(2), 128–147. [Google Scholar] [Crossref]

34. Ogar, A., Nkamare, S. E., & Effiong, C. (2020). Commercial bank credit and its contributions to economic growth in Nigeria, 1985–2018. European Journal of Accounting, Auditing and Finance Research, 8(3), 62–74. [Google Scholar] [Crossref]

35. Okonkwo, I. V. (2024). Loan-to-deposit ratio policy, credit supply and economic growth in Nigeria, 2015–2023. Journal of Central Banking Theory and Practice, 13(1), 91–113. [Google Scholar] [Crossref]

36. Olaoye, F. O., & Afolabi, T. S. (2023). Commercial bank credit and economic growth in Nigeria: Post-COVID dynamic OLS evidence, 2019–2022. Journal of Economic Policy Analysis, 5(1), 55–74. [Google Scholar] [Crossref]

37. Onoh, J. K. (2019). The dynamics of money, banking and finance in Nigeria. Astra Meridian Publishers. [Google Scholar] [Crossref]

38. Rajan, R. G., & Zingales, L. (2018). Financial dependence and growth. American Economic Review, 88(3), 559–586. [Google Scholar] [Crossref]

39. Rebelo, S. (1991). Long-run policy analysis and long-run growth. Journal of Political Economy, 99(3), 500–521. [Google Scholar] [Crossref]

40. Romer, P. M. (1986). Increasing returns and long-run growth. Journal of Political Economy, 94(5), 1002–1037. [Google Scholar] [Crossref]

41. Schumpeter, J. A. (1934). The theory of economic development. Harvard University Press. [Google Scholar] [Crossref]

42. Shaw, E. S. (1973). Financial deepening in economic development. Oxford University Press. [Google Scholar] [Crossref]

43. World Bank. (2023). Competition policy for innovation and growth. World Bank Group. [Google Scholar] [Crossref]

44. World Bank. (2024). World Development Indicators 2024. World Bank Group [Google Scholar] [Crossref]

• Determinants of Access to Formal Financial Services among Rural Farmers in Ethiopia: A Meta-Analysis
• Financial Development and Capital Market Performance in Nigeria