SECTORIAL ALLOCATION OF BANK CREDIT AND THE PERFORMANCE OF THE NIGERIAN ECONOMY

ABSTRACT The study investigates the impact of the sectoral allocation of bank credit on the performance of the Nigerian economy using annual time series data from 1990 to 2022. The variables adopted in this study for measuring sectorial allocation of bank credit where; bank credit to the production sector, bank credit to general commerce sector, bank credit to service sector and bank credit to other sectors. Gross domestic product was used to measure the economic growth in Nigeria. Time series data used for the study were obtained mainly from the Central Bank of Nigeria Statistical Bulletin 2021 edition amongst other sources. It was discovered that bank credit to the production sector exerts a positive and significant relationship with gross domestic product, bank credit to the service sector shows a negative and insignificant relationship while, bank credit to the general commerce sector and bank credit to other sector exerts a positive and insignificant relationship with gross domestic product. The study recommends that policies be formulated to facilitate easier access to credit for the production sector. This can be done through interest rate adjustments, relaxed collateral requirements, or specific loan programs tailored for businesses in the production sector. Also, it is necessary for the government and affected institutions to explore and encourage alternative investment channels for businesses instead of solely relying on bank credit.