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ABSTRACT
The impact of the banking sector on economy growth has generated lots of empirical studies with different findings. Banking activities is generally believed to be positively related with economic growth. More precisely, it is held that appropriate banking policies in certain situations can be used to stimulate growth and development in the economy. However, diverse opinions have continued to emerge on how the banking sector can affect the economy with respect to it's related variables such as savings deposit, demand deposits, interest rate, private sector credit amongst others. The main objective of this study is to ascertain the impact of banking activities such as private sector credit, demand deposits and savings deposit, on economy growth. Endogenous growth model is employed for the study with emphases on how savings deposit, demand deposit, interest rate and private sector credit affect economy growth in Nigeria. This study has empirically examined the impact of banking activities on economy growth in Nigeria using annual time series data for the period 1981-2019. The variables considered are, savings deposit, demand deposit, interest rate and private sector credit as independent variables. Augmented Dickey-fuller (ADF) test was used for the unit root test and the variables were found to be stationary at first difference. Then autoregressive distributed lag model (ARDL) technique was used to establish if the stationary variables exhibit long run relationship. Further, ECM is employed to correct any form of disequilibrium in the short run. The result of stationarity and normality test reveals that the model is fairly well specified and could be used for policy analysis. The analysis was based on data extracted from Central Bank of Nigeria (CBN) statistical bulletin (2019) and World Development Indicators (WDI). The result of the analysis shows that all the variables except private sector credit were not statistically significant at 5%. The study therefore suggest that the government should adopt policies capable of stimulating banking activities as well as maintain a stable interest rate which will ensure gainful banking activities to the country and its citizenry.
