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Abstract
The purpose of this study was to ascertain the effect of bank profitability on economic growth in Nigeria. However, in order to achieve the objectives of this study, we utilised four explanatory variables as proxies for bank profitability (credit to private sector, bank loans, bank return on assets and total assets to GDP) while real gross domestic product was used as a proxy for economic growth in Nigeria. The study covered a time period of 1995-2020 (26years). The descriptive statistics and regression analysis technique were adopted in carrying
out the study’s empirical analysis Based on the empirical analysis, the following findings were arrived at: firstly, the study ound that there is a positive and insignificant relationship credit to private sector and economic growth in Nigeria; second, the study found that bank loans have a significant effect on economic growth in Nigeria; third, bank return on assets have an insignificant effect on economic growth in Nigeria; and finally, total assets to GDP was found to have a positive and significant effect on economic growth in Nigeria. In view of the salient findings from this study, the following specific policy recommendations were put forth: banks in Nigeria should lend more to the private sector as doing so ensures they are lending to sectors that are likely to generate more income the loans granted which will culminate into a multiplier
effect of enhanced economic growth performance in the long run; the apex monetary authority in Nigeria (CBN) should ensure that banks are regulated to give out more proportion of their income as loans to individuals, private sector and public sector; banks should not leave customers’ deposits idle but should invest a large chunk of it on risk-free securities such as government bonds as well other risky securities with the adoption of effect risk management mechanism; and efforts should be made by banks to maintain continuous increase in their
assets which could be by diversifying, opening more branches, among others.
out the study’s empirical analysis Based on the empirical analysis, the following findings were arrived at: firstly, the study ound that there is a positive and insignificant relationship credit to private sector and economic growth in Nigeria; second, the study found that bank loans have a significant effect on economic growth in Nigeria; third, bank return on assets have an insignificant effect on economic growth in Nigeria; and finally, total assets to GDP was found to have a positive and significant effect on economic growth in Nigeria. In view of the salient findings from this study, the following specific policy recommendations were put forth: banks in Nigeria should lend more to the private sector as doing so ensures they are lending to sectors that are likely to generate more income the loans granted which will culminate into a multiplier
effect of enhanced economic growth performance in the long run; the apex monetary authority in Nigeria (CBN) should ensure that banks are regulated to give out more proportion of their income as loans to individuals, private sector and public sector; banks should not leave customers’ deposits idle but should invest a large chunk of it on risk-free securities such as government bonds as well other risky securities with the adoption of effect risk management mechanism; and efforts should be made by banks to maintain continuous increase in their
assets which could be by diversifying, opening more branches, among others.
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