Nexus Between Deposit Money Bank Performance and Non-Oil Sector Output Growth: Experience from Nigeria and South Africa

This study focused on investigating the nexus between deposit money bank performance and the non-oil sector nexus with emphasis on Nigeria and South Africa using the autoregressive distributed lag (ARDL) model. Some sets of annual time series data ranging from 1990 to 2020 were utilized. Performance indicators of deposit money banks like as return on assets (ROA) and return on equity (ROE) are used to capture the effects of deposit money banks on the non-oil sector. In addition, non-oil sector performance indicators such as agricultural value added (AVD), employment in agriculture (EIAG), manufacturing value added % of GDP – MVA, services value added (SVA) – a percentage of GDP, were employed as the measures of non-oil sector performance; while the control variables include interest rate (INTR) and exchange rate (EXR). In addition, the result of the long-run bound test shows that a long-run relationship also exists between deposit money bank performance and the non-oil sector. Evidence from the main findings in the ARDL results indicates that there is a positive long-run relationship between deposit money bank performance and non-oil sector performance. In the short run, the speed of adjustments from short-run to long-run for models 1 – 3 measured the speed of adjustments. The results of the country’s specific effects show that the deposit money bank has negative effects on the non-oil sector in Nigeria but has a significant of the South African non-oil sector. Thus, policies like economic diversification and enhancement of macroeconomic and institutional quality were recommended.