Banks’ Activities Effect on Economic Growth in Nigeria

Abstract

The operational and business activities of the bank is vital for the overall economic prosperity of Nigeria. The major activities of fund mobilisation and allocation is considerably agreed to have positive impact on economic growth. The main objective of this study is to investigate this general consideration, the direction of causality, and the degree of impact on a quarterly period from 1999-2020. Using the Johansen cointegration test, and the Granger non-causality test, a Toda–Yamamoto procedure. The results show a positive and significant long-short run cointegrating nexus between banks’ activities and economic growth. Substantiating the general consideration of a proportional nexus between economic growth and banking activities in Nigeria. The non-directional causality observed between economic growth and banking activities can be attributed to uncertainties not limited to supply-demand side effects, unexpected effects, sectoral adjustment effect, inflation effect, and real balance effect surrounding the banking and economic climate. The study recommends economic diversification in a period of economic and financial boom and affordable credit facilities for small and medium scale enterprises. To cushion and mitigate future vicissitude of a non-directional causality.