Project Materials




Need help with a related project topic or New topic? Send Us Your Topic 




The researcher looked at the performance of the Nigerian economy and bank advances and credit. This study’s goal was to investigate the connection between bank credit and advances, money supply lending rates, deposit volume, and GDP,

which served as a proxy for Nigeria’s economic performance. All variables’ data were gathered from the Nigeria Bureau of Statistics (NBS) and the Central Bank of Nigeria (CBN) statistical bulletins (secondary data). The regression method of ordinary least squares (OLS) was used to analyse the data gathered.

Using the empirical data and p. value (probability value), the researcher deduced that the volume of deposits, lending rate, and loans made by commercial banks have little bearing on GDP. The null hypothesis was approved as a result.

The researcher also discovered that the money supply and GDP are closely connected. The null hypothesis was thus disproved. Conclusion: The impact of commercial bank loans and advances on customer deposits on the Nigerian GDP is inversely correlated with their volume.

The high lending rate at which credits were granted could be the causal element. However, the researcher suggested that interest rate deregulation be carried out to a logical conclusion.

This is due to the fact that the issue of excessive interest rates has really thwarted efforts of potential investors to obtain loans for investment, which has negatively impacted the GDP performance of Nigeria.

It is obvious that any country that wants to have a healthy economy must also have a healthy financial sector, and past research has consistently demonstrated a substantial correlation between the health of a country’s financial sector and its overall economic performance.

Because they are the centre of attention in the financial sector, banks are crucial to any economy. It is impossible to overstate the significance of banks in any economy because a strong financial system is acknowledged as a necessary and sufficient prerequisite for every modern economy’s rapid growth and development (Sanusi 2012).

To ensure that credit is reasonably in accordance with competitively determinable interest, banks are obligated to serve the region or local communities in which they operate with an appropriate supply of credits for all legitimate business and customer financial demands.

In fact, one of the main economic activities of banks is to provide credit in the form of loans and advances. According to Sanusi (2002), one of the most important aspects of any economy’s growth is the availability of investible money.

For this reason, banks are now seen as the foundation of trade and business in general. A company might, for instance, get loans to buy machinery and equipment. Government organisations receive loans to cover a variety of recurrent and capital expenses.

Farmers obtain loans to purchase seeds, fertiliser, establish various types of farm structures, etc. Additionally, people and families use credit to pay for their purchases of products and services (Adeiyi, 2006).

Units with surpluses and deficits make up the typical capitalist or mixed economy. When a bank performs its primary economic function of intermediation, it mobilises and consolidates bank deposits before converting them into bank credits, which are often loans and advances.

Simply put, it involves receiving funds from depositors and disbursing some to borrowers for investments and other forms of economic development.

Financial institutions can use this process to function as middlemen, transferring money from surplus economic units (people and businesses with excess savings) to deficit economic units (firms and businesses in need of money to carry out desired commercial operations).

In general, it entails converting the bank’s largest obligations (deposit liabilities) into the bank’s largest interest-earning assets (bank credits, which mostly consist of loans, overdrafts, and advances).

Knowing that bank credits are processed deposits made by bank customers into the different accounts they maintain or use with the bank is useful.
Therefore, bank credits make up or rather enable banks to perform their main economic role, known as intermediation.

Therefore, according to the prudential guidelines established in 1990 by the central bank of Nigeria (CBN), credits are defined as financial facilities provided by banks to their clients, including all loans, advances, overdrafts, and other loss contingencies related to a bank risk. The researcher has chosen to substitute bank loans and advances with bank credits.

The performance of the Nigerian economy is related to the idea of output, and the idea of output is crucial in the study of macroeconomics because it fundamentally has to do with the output of a country’s economy. The number of products and services produced in a nation over a specific time period, typically a year, is referred to as output.

Officially, the most often used way to gauge a nation’s output is its gross domestic product (GDP). The gross domestic product (GPD) measures the market value of all officially acknowledged final products and services generated within a country at a particular moment.

It is impossible to overstate the importance of a country’s GDP because it is the primary indicator of economic growth and citizen living standards.

In fact, looking at a country’s output in terms of GDP is the best way to gauge how well its economy is performing because, by international standards, output (or GDP) measures how wealthy and economically viable a nation is.

Accordingly, a nation may be considered to be in a recession if its output (or GDP) growth is negative for three consecutive years, or, when analysed more closely, three consecutive quarters. Therefore, the researcher would use Nigeria’s GDP as a proxy for economic performance in that country.

The most significant institutions for allocating financial resources and mobilising deposits are commercial banks, sometimes known as deposit money banks (DMBs). As a result of these functions, they are a significant factor in economic expansion.

It is important to recognise that banks may play these roles and have the potential to mobilise financial resources and direct them towards profitable initiatives. Therefore, commercial banks would be interested in disbursing credits (loans and advances) to their numerous customers,

keeping in mind the three principles guiding their operation, which are profitability, liquidity, and solvency, regardless of the sources of income generation or the country’s economic policies.

However, a number of factors, including the current interest rate, the amount of deposits, the availability of money due to instructions from Nigeria’s central banks, to name a few, affect commercial banks’ decisions to lend money.

It should be recognised that these prevailing influencing factors also have an impact on the gross domestic product (GDP) of the nation because they have an immediate impact on the amount of credit provided for economic investment, and the amount of credit determines the level of the nation’s output (GDP) for that time period.
Consult appendix 1. for my review of the literature on this work.

Without the banking sector, the entire economy may come to a grinding halt and enter a condition of coma. The banking sector is viewed as the oil that lubricates the economic wheel to prevent friction and plodding.

Theoretical and empirical literatures appear to agree that financial development can affect and promote output (GDP) development, that there is a clear relationship between bank credits and economic growth,

which is synonymous with GDP growth, and that bank credits help any country’s financial system function efficiently.

These fundamental economic fundamentals appear to be escaping the Nigerian scenario as a result of recent financial turmoil and capital adequacy issues in the banking sector, the effects of which appear to raise questions about the impact of bank credits on the economy.

Another argument makes the case that the Nigerian economy’s production in terms of GDP has not utilised or been comparable to banks’ inputs in terms of banks’ credits that have been issued upon release in the economic activities.

In order to determine the extent to which these bank credits were used to raise Nigeria’s GDP and to determine whether the output (GDP) can be equated with the bank inputs (credits), this research will examine the amount of loans and advances that banks have released into the economy.

The study’s main goal is to scientifically analyse the impact of bank loans on Nigeria’s economic growth and overall economic performance.
The following goals are set forth:

To ascertain whether bank advances and loans have an impact on Nigeria’s GDP growth.

To ascertain whether the availability of money promotes Nigeria’s GDP growth.

To ascertain whether lending (interest) rates have an effect on the GDP growth in Nigeria.

To ascertain whether deposit volume has an impact on the GDP growth of Nigeria.

Need help with a related project topic or New topic? Send Us Your Topic 


Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.