The Role Of Commercial Banks In The Development Sector Of Nigeria Economy

THE ROLE OF COMMERCIAL BANKS IN THE DEVELOPMENT SECTOR OF NIGERIA ECONOMY

ABSTRACT

The project set out to examine the role of commercial banks to economic development of Nigeria from 1980 – 2008. The variables used for this study are commercial bank loans and advances, interest rate on the loans, gross fixed capital formation. The main objective of the study is to examine the role of commercial bank to economic development in Nigeria. The methodology involves the use of ordinary least squares (OLS) using E-VIEWS econometric package. These include R² to test the explanatory power of the estimate, T-test to determine the significance of the individual parameter estimates; F-test to determine the significance of the entire regression plane and second order test to check of the properties of OLS are violated. The result of the regression analysis shows that commercial banks loans and advances, and gross fixed capital formation have a positive relationship with the economic development in Nigeria, while interest rate on the loan show a negative relationship with the dependent variable. Based on the findings, the researcher made the following recommendations among others: (i) The Central Bank should give adequate directives to the commercial banks to give out loans and advances to the economic sectors with little interest rate. (ii) Gross fixed capital formation should be properly managed and periodically reviewed

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