IIARD International Institute of Academic Research and Development

INTERNATIONAL JOURNAL OF ECONOMICS AND FINANCIAL MANAGEMENT (IJEFM )

E-ISSN 2545-5966
P-ISSN 2695-1932
VOL. 9 NO. 6 2024
DOI: 10.56201/ijefm.v9.no6.2024.pg35.51

---

Bank Credit and Financial Performance of Listed Manufacturing Firms in Nigeria

Adeniyi Lateef Temitope

---

Abstract

Manufacturing enterprises in Nigeria face significant challenges due to limited funding, resulting in a low contribution to economic growth. To address this issue, we conducted an ex-post facto research study aimed at assessing the impact of bank lending on the performance of Nigeria's industrial sector. In this study, we developed an econometric model with manufacturing output as the dependent variable and bank credit, interest rates, and exchange rates as explanatory factors. We collected annual time series data from the Central Bank of Nigeria Statistical Bulletin spanning from 1981 to 2017 and conducted our analysis using the dynamic ordinary least squares (DOLS) technique. According to our findings, both bank lending and interest rates have a notable positive impact on the performance of Nigeria's manufacturing sector. In contrast, the exchange rate has a significant negative influence on its performance. These results underscore the crucial role played by bank lending in enhancing the performance of Nigeria's manufacturing sector. Consequently, we recommend that monetary authorities implement policies aimed at reducing lending rates to stimulate borrowing and make deposit rates more attractive to encourage savings.

keywords:

Bank credit, financial performance, manufacturing firms, financial institutions

---

References:

Abubakar, A. A., & Audu, B. I. (2011). Financing small and medium enterprises (SMEs) in
Nigeria: Challenges and prospects. International Journal of Business and Social Science,
2(1), 135-141.
Adegbite, S. A. (2006). The role of manufacturing sector in economic growth: Lessons for Nigeria.
Journal of Social Sciences, 12(2), 83-90.
Akinleye, O. O., Adeboye, O. A., & Adeoye, O. A. (2021). Bank Credit, Firm Size, and Financial
Performance of Manufacturing Firms in Nigeria. International Journal of Finance and
Banking Research, 7(2), 44-59.
Akinlo, A. E., & Lawal, A. I. (2015). Bank credit and output growth in Nigeria: A co-integration
analysis. Journal of Economics and Sustainable Development, 6(3), 59-68.
Berger, A. N., & DeYoung, R. (2001). The effects of geographic expansion on bank efficiency.
Journal of financial services research, 19(2-3), 163-184.
Berger, A. N., & DeYoung, R. (2001). The effects of geographic expansion on bank efficiency.
Journal of Financial Services Research, 19(2-3), 163-184.
Çekrezi, E. (2016). The determinants of commercial banks' financial performance in Albania.
International Journal of Economics, Commerce and Management, 4(10), 14-24.
Central Bank of Nigeria (CBN). (2011). Manufacturing Sector Survey Report. Retrieved from
https://www.cbn.gov.ng/Out/2011/RSD/Manufacturing%20Sector%20Survey%20Repor
t.pdf
Central
Bank
of
Nigeria
(CBN).
(2017).
Statistical
bulletin.
Retrieved
from
https://www.cbn.gov.ng/Out/2017/SD/Statistical%20Bulletin%20%202017%20(Comple
te%20Report).pdf
Cole, R. A., & Wolken, J. D. (1995). Bank and nonbank competition for small business credit:
Evidence from the 1987 and 1993 national surveys of small business finances. Federal
Reserve Bulletin, 81(2), 107-131.
Cole, R. A., & Wolken, J. D. (1995). Financial services used by small businesses: Evidence from
the 1993 National Survey of Small Business Finances. Federal Reserve Bulletin, 81(11),
958-973.
DeYoung, R., Glennon, D., & Nigro, P. (2001). Borrower-lender distance, credit scoring, and loan
performance: Evidence from informational-opaque small business borrowers. Journal of
Finance, 56(3), 1137-1165.
DeYoung, R., Lang, W. W., & Nolle, D. E. (2001). How the internet affects output and
performance at community banks. Journal of banking & finance, 25(9), 1769-1794.
Egbetokun, A. A., Jegede, O. J., & Oyedokun, O. O. (2019). Bank Credit and Financial
Performance of Nigerian Manufacturing Firms: Evidence from the Nigerian Stock
Exchange. Journal of African Business, 20(2), 244-262.
Ekezie, C. A. (2007). The Role of Banks in the Nigerian Economy. Munich Personal RePEc
Archive. Retrieved from https://mpra.ub.uni-muenchen.de/3011/
Friedman, M. (1968). The role of monetary policy. American Economic Review, 58(1), 1-17.
Ibeh, C., & Nwosu, C. (2020). Bank Credit and Financial Performance of Listed Manufacturing
Firms in Nigeria: A Comparative Study. International Journal of Advanced Research in
Management and Social Sciences, 9(6), 54-67.
Igbinedion, V. I., & Ogbeide, E. I. (2016). Bank credit and economic growth in Nigeria: A granger
causality analysis. Journal of Finance and Investment Analysis, 5(1), 47-61.
Iheanacho, G. O., & Ajaero, O. C. (2019). Bank Credit and Financial Performance of
Manufacturing Firms in Nigeria: A Dynamic Panel Data Analysis. International Journal
of Economics and Financial Issues, 9(6), 87-95.
Imoughele, L. E., & Ismaila, A. (2014). Credit availability and manufacturing output in Nigeria.
International Journal of Economics, Commerce and Management, 2(5), 1-14.
Iyoha, F. O. (2004). The impact of financial sector reforms on the performance of the Nigerian
economy. Central Bank of Nigeria Economic and Financial Review, 42(4), 1-24.
John, N. N., & Terhemba, D. (2016). Bank credit and economic growth in Nigeria: An empirical
analysis. Journal of Economics and Finance, 7(4), 12-22.
Keynes, J. M. (1936). The general theory of employment, interest, and money. Macmillan.
Matthew, O., & Ojo, E. A. (2017). Bank Credit and Financial Performance: Evidence from Listed
Manufacturing Firms in Nigeria. International Journal of Economics, Commerce and
Management, 5(10), 44-54.
McKinnon, R. I. (1973). Money and capital in economic development. Brookings Institution Press.
Mike, A. (2010). Financing manufacturing industry in Nigeria: The role of the banking sector.
African Journal of Business Management, 4(6), 962-968.
Muchingami, C., Monametsi, K., & Paradza, G. (2017). An analysis of the relationship between
bank lending and the manufacturing sector performance in Zimbabwe. International
Journal of Economics, Commerce and Management, 5(3), 107-119.
Muchiri, P. N., Shukla, P., & Kibachia, P. M. (2017). The impact of credit facilities on financial
performance of small and medium enterprises in Rwanda. International Journal of
Economics, Commerce and Management, 5(2), 108-122.
Mukasa, A. S., Simpasa, A., & Salami, A. O. (2016). Credit constraints and agricultural
productivity in Ethiopia: A panel data analysis. African Development Review, 28(S1), 47-
doi: 10.1111/1467-8268.12207
Odior, E. S. (2013). Bank credit and industrial output in Nigeria. Arabian Journal of Business and
Management Review, 2(10), 56-63.
Odufuye, F. O. (2017). Bank credit and economic growth in Nigeria: An empirical analysis.
Cogent Economics & Finance, 5(1), 1327236. doi: 10.1080/23322039.2017.1327236
Ogbeba, J. E., & Okoi, M. O. (2017). Bank credit and industrial performance in Nigeria: Evidence
from the manufacturing sector. International Journal of Accounting and Financial
Reporting, 7(3), 219-229.
Ogunsakin, R. T. (2014). Impact of credit facilities on manufacturing output in Nigeria. Journal
of Economics and Sustainable Development, 5(12), 92-99.
Ojo, S., & Omoniyi, O. B. (2018). The Impact of Bank Credit on the Financial Performance of
Manufacturing Firms in Nigeria. International Journal of Business and Economic
Development, 6(1), 1-11.
Okon, E. E., & Osesie, G. I. (2017). Credit Access and Manufacturing Firms Performance in
Nigeria. Asian Journal of Economics, Business and Accounting, 5(1), 1-10. doi:
10.9734/AJEBA/2017/35152
Okoye, E. I., Nwakoby, I. C., & Okorie, E. C. (2016). Bank credit and economic growth in Nigeria:
An empirical investigation. European Journal of Accounting, Auditing and Finance
Research, 4(12), 35-45.
Olanrewaju, O. E., Aremo, A. B., & Aiyegbusi, O. F. (2015). Banking sector reforms and the
output of the manufacturing sector in Nigeria: A cointegration analysis. Journal of
Economics and Sustainable Development, 6(23), 127-134.
Olanrewaju, T. O., Aremo, A. J., & Okorie, N. U. (2015). Bank credit and economic growth in
Nigeria: A granger causality test. International Journal of Empirical Finance, 4(3), 131-
Onakoya, A. B., Ogundajo, G. A., & Johnson, T. O. (2017). Bank credit and industrial performance
in Nigeria: Evidence from manufacturing and construction sectors. International Journal
of Economics, Commerce and Management, 5(4), 16-28.
Orji, A. C., Anthony-Orji, O. I., Nchege, C. M., & Okafor, R. G. (2015). The impact of bank credit
on manufacturing sector output in Nigeria. European Journal of Accounting, Auditing
Parvesh, K., & Afroze, S. (2016). Bank performance and capital adequacy requirements: Evidence
from private sector banks in India. International Journal of Economics, Commerce and
Management, 4(5), 1-15.
Shaw, E. S. (1973). Financial deepening in economic development. Oxford University Press.
Stiglitz, J. E., & Weiss, A. (1981). Credit rationing in markets with imperfect information.
American Economic Review, 71(3), 393-410.
Stiglitz, J. E., & Weiss, A. (1981). Credit rationing in markets with imperfect information. The
American Economic Review, 71(3), 393-410.
Tarawneh, H., Bashar, O., Khalaf, R., & Assaf, R. (2017)

DOWNLOAD PDF

---

Back