Determinants of domestic credit to private sector in Nigeria

The domestic credit to private sector in Nigeria has been continually lower than relevant benchmarks. Given the unceasing economic challenges in Nigeria, this study examines the determinants of domestic credit to the private sector in Nigeria using Autoregressive Distributed Lag (ARDL) bounds testing approach to analyze time-series data from 1970 to 2023. The empirical findings show that financial system deposits and broad money exhibit positive and statistically significant relationships with domestic credit to the private sector, whereas liquid liabilities exhibit a negative and statistically significant relationship in the long run. Additionally, financial system deposits and broad money show negative and statistically significant relationships in the short run, while liquid liabilities show both positive and negative statistically significant relationships over the lags. However, the interest rate spread, and inflation rate are not statistically significant. The findings suggest the need to encourage the provision of domestic credit to private sector in order to enhance investments across Nigerian economic sectors, facilitate the development of new technologies and create channels for government tax income.