DETERMINANTS OF DEPOSIT MONEY BANK CREDIT TO
MANUFACTURING SECTOR IN NIGERIA

ADEMOLA, Abimbola Oluwaseyi
Department of Banking and Finance,
Osun State University, Osogbo, Osun State, Nigeria
AFOLABI, David O.
Department of Accounting and Finance,
Ajayi Crowther University, Oyo. Oyo state
ABSTRACT
This study examined the determinants of deposit money bank credit to the manufacturing sector in
Nigeria. Specifically, the effect of macroeconomic factors, proxied by inflation rate (INF), liquidity
ratio (LQD), loan to deposit ratio (LTDR) and prime lending rate (PLR) on DMBs’ credit was
evaluated. Annual time series data spanning from 1986 to 2021sourced mainly from CBN Statistical
Bulletin was used. The study employed Augmented Dickey-Fuller test (ADF) and Autoregressive
Distributed Lag (ARDL) estimation techniques. Findings revealed that INF and PLR have positive but
insignificant effect on DMBs’ credit in the long run. Also LTD ratio has positive significant effect in the
short run, while liquidity ratio affects banks’ credit negatively both in the short and long run. Moreover,
results showed short run causality from explanatory variablesto deposit money banks’ credit. The study
concluded that INF, LTDR, LQR and PLR are critical factors that influence DMBs’ credit to
manufacturing sectors. Therefore, it is recommended that the Central Bank of Nigeria should formulate
favorable monetary and macroeconomic policies in order to encourage banks’ lending to
manufacturing firms in Nigeria thereby enhancing economic growth.
Keywords: Bank credit, determinants, economic growth, financial intermediation.