Deposit Money Bank Credit To Private Sector And Private Domestic Investment In Nigeria

The study investigated the impact of deposit money bank credit to private sector on private domestic investment from 1981 to 2023 using vector error correction model (VECM). The study specifically examined the following objectives: ascertain the impact of deposit money bank credit to agriculture on private domestic investment in Nigeria, examine the extent of the impact of deposit money bank credit to manufacturing on private domestic investment in Nigeria and investigate the magnitude of the impact of deposit money bank credit to mining on private domestic investment in Nigeria. The pre-test results indicated that all the variables were integrated of order one while Johansen cointegration test confirmed that the variables were cointegrated. The result indicated that deposit money bank credit to agriculture significantly result in rise in private domestic investment both in the short run and in the long run. Also, the study showed that deposit money bank credit to manufacturing significantly led to increase in private domestic investment. Finally, the study found that deposit money bank credit to mining in the short run does not impact on private domestic investment but significantly resulted in increase in private domestic investment in the long run. Based on these findings, the study recommended adoption of expansionary monetary policy to increase credit availability to agricultural development, creation of mining guarantee scheme to mitigate risk that associated to lending to mining sector and lowering interest rate to 5% to encourage private sector borrowing. These measures if effectively followed will promote credit availability to private sector and will invariably result in increase in private domestic investment.