ABSTRACT

This study empirically examined the relationship between banking sector performance and economic growth in Nigeriaover the period 1996 to 2020 (26 years). The ordinary least square (OLS) econometric technique as well as the Augmented Decay Fuller unit root test and correlation coefficient were used in the analysis of data. The results obtained from the empirical estimation revealed that while bank loans (BLOANS)has an insignificant positive relationship with economic growth; bank deposits (BDEP), bank assets to GDP (ASS/GDP) and number of banks branches (NBNKS) have significant positive relationship with economic growth. However, bank assets (BASS) and credit to private sector (CTPS) have an insignificant negative effect on economic growth in Nigeria. Hence, the study recommends that, since bank’s assets are independent of economic growth, and in order to ensure continuous positive effect on growth in Nigeria, management should always ensure proper management and utilization of bank’s assets on profitable investments that will enhance shareholders’ wealth, as this will go a long way to ensure that bank’s assets have the needed positive effect on economic growth in Nigeria. Also, deposit money banks should be mandated by government to always issue medium-to-long term reasonable amount of loans to the real sector of the economy to enable investors prosecute projects that will have meaningful impact on the economy.