Bank lending behaviour and economic growth: an empirical analysis with implication for monetary policy formulation in Nigeria

Abstract

Preliminary findings from the empirical analysis show that the banking sector has not supported real sector output growth in its lending policy. The combined effects of risk aversion and infrastructural problem in the real sector represent serious constraints on credit flow to the private sector and the sectors declining marginal product of capital. Overall, while the banking sector has indeed, succeeded in deposit mobilization, it has nevertheless, not done a good job in its intermediation functions. The analysis further reveals the presence of policy distortions in the system, and its negative influence on banks' lending behaviour. The need to address these distortions cannot be overemphasized if banks are to resume their traditional role of economic development in Nigeria.