THE ROLE OF DEPOSIT MONEY BANK CREDIT AND LENDING RATES IN SHAPING THE GROWTH DYNAMICS OF NIGERIA’S MANUFACTURING SECTOR

Abstract

This study investigated the role of deposit money bank credit and lending rates in shaping the growth dynamics of Nigeria’s manufacturing sector. The aim was to examine how credit allocation and interest rates influence manufacturing output over a 43-year period. The study adopted an ex-post facto research design, utilizing annual time-series data from 1980 to 2023, sourced from reputable institutions such as the Central Bank of Nigeria and the National Bureau of Statistics. The methodological approach employed the Autoregressive Distributed Lag (ARDL) model, which facilitated the analysis of both short- and long-term relationships between the variables. The theoretical framework for the study was based on Schumpeter’s Supply Leading Theory, Credit Creation Theory, and Wicksell’s Theory of Lending and Economic Growth. The findings revealed that credit to the manufacturing sector (DBCM) has a significant positive impact on manufacturing sector output (MSO), both in the short and long run. In contrast, high lending rates (DBLR) negatively affect manufacturing growth, corroborating previous empirical studies. The study concluded that enhancing credit access and reducing lending rates are essential for fostering industrial growth. Therefore, the study recommended policies aimed at reducing lending rates, improving credit accessibility for small and medium enterprises (SMEs), and promoting financial inclusion to drive the competitiveness and productivity of Nigeria's manufacturing sector.