The International Institute for Science, Technology and Education (IISTE)
Abstract
The private sector is recognized as a critical stake holder and partner in economic development. The study was conducted to determine the effects of Credit to Private sector on Economic Growth in Nigeria. Data on Gross Domestic Product (GDP), Credit to Private Sector (CPS), Export (EX) and Import (IM) were collected from the Central Bank of Nigeria Statistical Bulletin spanning from 1960 through 2010. Analysis of data was achieved using the Augmented Dickey-Fuller test for stationarity, the Johansen test for Cointegration, the Granger’s test for Causality and the Error Correction Mechanism to reconcile the short-run and the long-run behavior of the variables. The results indicate that a long-run relationship exists between Economic Growth (GDP), Credit to Private Sector ratio (CG) and Terms of Trade (EXIM) in Nigeria. A unidirectional relationship exists between Economic Growth and Ratio of Credit to GDP, in the direction CG GDP, in Nigeria. Economic Growth in Nigeria was discovered to be in its equilibrium. Based on these findings, it was recommended that the Federal Government of Nigeria should increase efforts in pursuing Credits for economic growth and foreign partnership. These will encourage economic growth and help the private sector in Nigeria overcome its challenges. Keywords: Credit to Private Sector, Gross Domestic Product, Terms of Trade, Unit root, Cointegration.