Abstract

This study empirically assesses the impact of deposit money bank lending on economic   development   of   Nigeria by specifically ascertaining the impact of deposit money bank lending on   real   gross   domestic   product   and   index   of   industrial production. The data sourced from the Central Bank of Nigeria statistical bulletin were diagnosed for serial correlation, heteroskedasticity and Ramsey Reset model fitness specification and stationarity. The Johansen co-integration envisaged a long run relationship between deposit money bank lending and gross domestic product but such could be said for index of industrial production. The granger impact assessment result shows that deposit money bank’ lending has significant impact on real gross domestic product and real gross domestic product on the other hand, has significant impact on credit to private sector. Index of industrial production was not significantly influenced   by deposit money bank lending activities. The vector error correction model depicts that for achievement of long term growth and development   of   the   Nigerian   economy,   deposit money bank lending is very pivotal as the high interest rate charged by deposit money bank’ remain a threat to the positive influence of banks’ credit to the economy. The Central Bank of Nigeria should implement regulation to stop banks from centring loans and advances to a particular sector which is, oil and gas to improve credit flow to other strategic sectors, especially agriculture and industries   to   increase   their   contributions   to   gross   domestic product of Nigeria. The monetary policy of the Central Bank of Nigeria should complement fiscal policies of the government to reduce the level of inflation in country, having regard to its negative effect on index of industrial production.