Effect of Selected Sectoral Bank Credit on Socio-Economic Development in Nigeria

This study examines the relationship between sectoral bank credit and socio-economic development in Nigeria, using the Inequality-Adjusted Human Development Index (IHDI) as a measure of socio-economic development and sectoral credit to agriculture, manufacturing, and mining as the key independent variables. Employing an ARDL Co-integration approach, the study identifies a significant long-run relationship between sectoral bank credit and socioeconomic development. The Error Correction Model (ECM) reveals a strong adjustment mechanism, with significant negative short-run impacts from bank credit to agriculture and manufacturing on socio-economic development, possibly due to inefficiencies in credit allocation and sectoral challenges. Diagnostic tests, including heteroskedasticity, serial correlation, and CUSUM stability tests, confirm that the model is robust, with no issues of instability or misspecification. The study concludes that while sectoral credit has a long-term positive impact on socio-economic development, there are short-term challenges that need to be addressed. It recommends improvements in financial infrastructure, policy reforms for better credit allocation, targeted support for agriculture and manufacturing, and enhanced financial literacy for beneficiaries. These findings contribute to the understanding of how financial intermediation can foster sustainable development in emerging economies like Nigeria.