ASSESSMENT OF THE IMPACT OF BANKING SECTOR CONSOLIDATION ON THE REAL SECTOR OF THE NIGERIAN ECONOMY
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Abstract
The banking sector plays a crucial role in the economic development of countries while the real sector is regarded as the backbone of the economy. This study examines the relationship between bank capitalization and lending capacity on one hand, and growth and development of the real sector for the period 2002-2007. A non probabilistic sampling technique was adopted. The data used for the study were collected purely from secondary sources. Using the Raw Score Computational Method of Correlation Coefficient, test of significance at 95% confidence level, the study established that there is a very strong positive relationship exists between size of Bank capitalization and Bank Lending. The study also established a strong positive relationship exists between size of Bank Lending and real sector growth in particular and Economic Growth in general. Consequently, it is recommended that the minimum capital base of banks should be further increased so as to have a more robust real sector. This will increase the intermediate money supply (M4) which would no doubt reflect positively on the cost of borrowing thereby reducing interest rate and stimulate investment and growth.