Deposit Money Banks and Economic Growth and Development in Nigeria

Abstract

This paper examines the effect of deposit money banks intermediation role on economic growth and development in Nigeria. The main objective of the research was to ascertain the extent to which sartorial credit allocation by deposit money banks have influenced growth in the economy.Time series data covering the period 1973-2011 for deposits money banks credits in Nigeria and per capita gross domestic product were analyzed within the framework ofEngle-Granger Representative Theorem the approach estimated a co-integrating regression using ordinary least square estimator, and then investigated the presence of a co-integration relation by examining the stationarity of the estimated residual series.The findings indicate that bank financing on production which consists of agriculture, forestry and fishery, manufacturing, mining and quarrying, real estate and construction sub-sectors is significantly promoting economic activity. Financing on general commerce, services and others sectors however, yields negative effect on economic activity within the sample period. The implication that can be drawn from this study is that to ensure that the banking system performs its role of credit allocation effectively it must channel funds into productive investment and more productive uses, deposit money banks should act as efficient financial intermediaries devoted to allocating resources to the most productive uses.