Impact of money supply and private sector credit on economic growth of Nigeria

Abstract

This study examines the relationship between Money supply and Private Sector Credit on economic growth in Nigeria with a secondary data emanated from Central Back of Nigeria Statistical Bulletin for the period 1985 to 2019 using Autoregressive Distributed Lag (ARDL) approach. The result shows long run relationship between the variables. More so, it reveals
Money supply and Private Sector Credit have significant positive impact on economic growth in Nigeria in both short-run and long-run. The results further reveal insignificant negative relationship between interest rate and economic growth in in both the period. Furthermore, causality test reveals bi-directional relationship financial development Money supply, Private Sector Credit and economic growth in Nigeria. The study also reveals unidirectional causality running from interest rate to economic growth in Nigeria. In view of these findings, the study recommends need for government to improve on the macroeconomic environment
through the harmonization of monetary and fiscal policies in order to ensure stability of the economic aggregates. Also, attention should be focused on deepening the financial sector in Nigeria through the creation of modern, efficient and strong financial institution that will mobilize the idle financial resources domiciled outside the financial system use them to drive Nigeria’s economic growth.