Evaluation of the Intermediation Role of the Deposit Money Banks on the Real Sectors of the Nigerian Economy (1999 - 2008)

Abstract

This paper assesses the impact of intermediation roles of banks on the performance of the real sectors of the Nigerian economy. There is a serious debate going on in the financial foray on whether the banking industry's intermediation role has significant impact on the performance of the real sectors of the Nigeria economy. The banking industry as engine for economic growth is expected to play a catalytic role of extending enough credits and advances to the real sectors in order to ensure their growth and contribution to the GDP of the economy. As a matter of guise such expected role is not impacted much on the performance of the real sector. It has been a guise because most of the literatures had not been tailored towards Nigerian banking industry's intermediation role and the growth of the real sectors. Hence, this study becomes necessary to fill the gap. The study evaluated the extent to which banking industry's intermediation role has inherent impact on the transformation and improvement of the real sectors performance. The objectives of this study were to: (i) determine whether credits from the banking sector has any positive significant effect on the performance of agriculture; (ii) ascertain if credits from the banking industry has any positive significant effect on the manufacturing sector; (iii) assess the effect of banking industry's credit on the performance of mining sector of the Nigerian economy. The research design adopted in this dissertation was ex-post facto, (the use of secondary data). The researcher simply analyzed the reported data of the study variables extracted from Central Bank of Nigeria (CBN) and Nigerian Deposit Insurance Company (NDIC) Annual Reports and Accounts. The population of the study was finite comprising 25 deposit money banks operating in Nigeria. A sample size of 21 banks was determined using Tara Yamane's formulae. Parametric statistics in forms of mean, standard deviation, ANOVA, student t-test, co-efficient of correlation and simple linear regression with SPSS were used to analyze the data. The results are: There was positive but not significant effect of banking industry ' s credits on the performance of agriculture as such credits from banking industry did not affect the agricultural component of GDP significantly ( t = 0.530, P < 0.142). There was a strong positive significant effect of banking industry credits on the manufacturing component of GDP (t= 0.741, P > 0.0 22). f here was no significant effect of banking industry credits on the mining components of GDP, (t = 0.573, P < 0.107). The study recommends among other things that CBN should continue to collaborate with all stakeholders in repositioning the banking industry to maximally contribute its quota to the country's real GDP growth rate. Again, there is need for close monitoring of the credit facilities extended to these sectors especially the agricultural sector as some of these facilities are diverted to other personal uses rather than for the purpose they are meant for. The study concludes that despite the series of reforms introduced into the banking system since 1952 to date, the intermediation roles of banks have not positively significantly affected the sectors GDP growth rate in Nigerian context.