PRIVATE SECTOR DEPOSITS AND ECONOMIC GROWTH IN NIGERIA.
Abstract
Given the perceived connection between bank deposits and bank lending, this study investigated the effects of private sector deposits on the growth of the Nigerian economy for the period 1994 to 2023. Real GDP was adopted as a proxy for economic growth while private sector deposit was disaggregated into demand, time, savings and foreign currency deposits. Data for the study were sourced from Central Bank of Nigeria (CBN) statistical bulletin for 2023. Following preliminary analysis that covered descriptive analysis and ADF unit root test, the study adopted the Johansen cointegration analytical technique, granger causality test and ECM estimation for further analysis. The validity and reliability of results were checked using multicollinearity, serial correlation and heteroscedasticity tests. Basically, the study revealed that there is a long run relationship between private sector deposits and economic growth in Nigeria. Also, results showed that private sector’s demand, time and foreign currency deposits have positive insignificant effects on real GDP which the sector’s savings deposits have negative but also insignificant influence on real gross domestic product. On this note, the study concluded that the effect of private sector deposits on economic growth in Nigeria is insignificant. This led to the suggestion that there is need for banks to offer competitive lending rates that will be attractive to the public so as to be able to attract more deposits for onward lending to the deficit unit of the economy. Also, the regulatory authorities on their part should scale down lending rate by bringing down monetary policy rate. This will help in pushing more funds from the public into the banking system.
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Published in UNIPORT JOURNAL OF BUSINESS, ACCOUNTING & FINANCE MANAGEMENT
ISSN: 1596-9911
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