An Analysis of the Impact of Sectoral Allocation of Deposit Money Bank’s Credit on Manufacturing Sector Performance in Nigeria

This paper used descriptive statistics, Phillips-Perron unit root test, cointegration test and error correction mechanism to explore impact Deposit Money Bank (DMBs) credit on manufacturing sector performance in Nigeria between 1981 and 2019. The unit root test results show that all the variables are stationary at first difference. It was observed from the Johansen cointegration test that the variables have long run relationship. This provides the pre-condition for fitting the error correction model. The parsimonious ECM results revealed deposit money banks’ credit to the manufacturing sector impacted positively on the performance of manufacturing sector. This implies that increase in deposit money banks’ credit stimulated output in the sector. It further observed from the results that iinterest rate was significant in explaining changes in the performance of the manufacturing sector output. This confirms the critical role of cost of funds in investment decision and the performance of the economy at large. Inflation rate was also significant in explaining changes in the performance of the manufacturing sector. Given the findings, the study recommended that there should be increase in banks’ funding to the manufacturing sector businesses to boost production and economic growth in the country