Bank Credit and Financial Performance of Listed Manufacturing Firms in Nigeria
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
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