Commercial Banking and Economic Growth in Nigeria

This study investigates the contribution of commercial banks to economic growth in Nigeria using secondary data covering the period of 1980-2016 that were sourced from the Central Bank of Nigeria (CBN). The analysis of the study was conducted using regression model of the Ordinary least Square (OLS) technique to ascertain the relationship between financial intermediation (also including other growthinducing variables) and economic growth in Nigeria. The results show that financial intermediation-our yardstick for commercial banks operation, has a positive and significant impact on economic growth in Nigeria. Hence, it is therefore recommended that monetary authority should be sensitive to the behavior of the aforementioned variables so as to ensure economic growth and development in the country. Government should enforce a guiding principles or laws that will be regulating and monitoring the banking activities to curb corrupted practices which are a bane for growth. The study strongly recommends the strict implementation of the risk-focused and rule-based regulatory framework by the regulators. This it is believed will reduce the high incidence of huge bad debts profile of banks and consequently improve the assets quality of banks for better performance. The Central Bank of Nigeria (CBN) being banks’ supervisory/regulatory agent should intensify its efforts towards effective monitoring and ensure that the gains from the commercial bank activities are sustained in the growth of the Nigerian economy.

Keywords: Commercial banking, Economic growth, Financial intermediation, Capital stock, Prime rate