ABSTRACT

This study investigates the impact of private sector credit on Nigerian’s economic growth by applying the Ordinary Least Square technique using time series data from 1981 to 2015. Real Gross Domestic Product (RGDP) is the dependent variable and proxy for economic growth, while the independent variables are Private Sector Credit (PSC), Gross Fixed Capital Formation (GFCF), Nominal Exchange Rate (NER), Gross Total Government Expenditure (GEXP) and Prime Lending Rate (PLR). PSC captures deposit money banks’ credit to the privatesector as a proportion of nominal GDP. GEXP, NER and PLR are proxies forfiscal, exchange rate and monetary policies, respectively. The stationarity of the variables were tested using the Augmented Dickey-Fuller (ADF). The variables RGDP, NER, GFCF were integrated of order of one i.e { I(1)}, PSC and GEXP were integrated of order two i.e {I(2)}, while PLR had no unit root. Some of the major findings includes: There exist a positive significant relationship between private sector credit, prime lending, gross fixed capital formation and real gross domestic growth in Nigeria. While nominal exchange rate and government expenditure had a negative impact on economic growth in Nigeria. Also, the empirical findings revealed that there is no long-run relationship between private sector credit and real gross domestic output in Nigeria. In conclusion of the findings, it was recommended that more credits should be channeled to the private sectors of the economy as this was shown to have significantly influenced economic growth in Nigeria.