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Bullion

Keywords

Banking, Nigerian economy, Nigeria, Economic development, GDP

Abstract

Globally, banks in developing countries are expected to play very vital and effective roles in financing their economic projects and activities as their contribution in ensuring sustainable economic growth. This expectation is as a result of the fact that there is acute shortage of capital in the developing countries of the world. ln this paper, attempt was made to address how banking system credit can be used as an instrument of economic growth in Nigeria. The specific objectives that banking system credit were expected to achieve were also stated. lt's was revealed that though credits have increased tremendously in recent times, the expected effect on domestic economy and output or GDP in particular is not significant. . lt was revealed that though credits have increased tremendously in recent times, the expected effect on domestic economy and output or GDP in particular is not significant. While credits to Non-Financial Public Enterprise and other productive sectors declined consistently, credit to the Private sector comprising mainly of households whose demand for credit facility is basically for consumption increased astronomically. The implication of this lopsided distribution of banking system credit is that the Nigerian economy is consumption based and that negates the principle of Cobb Douglass production function because credits channelled for consumption do not impact or influence output or GDP growth as other factors of production do, rather it drains the foreign reserve thus weakening the domestic currency with its concomitant influence on inflation.

Author Bio

The Author is staff of the Igbinedion University Okada. Edo State Nigeria.

Publication Title

CBN Bullion

Issue

2

Volume

34

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