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Abstract
The research objective was to investigate how variations in Bank credit to private sector are attributed to monetary and fiscal macroeconomic policies between 1990 and 2023 to inform policy interventions. Quantitative approach was adopted with data sourced from the CBN statistical bulletins. The research employed the use of the Autoregressive Distributed Lag (ARDL) Model to empirically analyze both short and long run dynamics. The Augmented Dickey-Fuller Unit root test was conducted to determine the stationarity of variables in the study. It was established that the data was a mix of I(0) and I(1) variables indicating that some variables were stationary at levels I(0) while others were stationary after first differencing I(1). Findings revealed that a mixed short run effect exist between both policy instrument and bank credit to
private sector. The study revealed that initially, a percentage increase in both policies significantly increase bank credit to private sector but over time, this expansion causes negative changes in credit availability and cost. In the long run, it was observed that these macroeconomic policies exert significant positive change on bank credit. While these policies have positive effect on credit, their interaction negatively and significantly affect credit growth implying that these policies are complementary. The negative significant effect proves that on the average, an increase in government expenditure worsens the negative impact of interest rate which crowds out private sector investment through credit crunch. While these policies positive and significant
affect bank credit to the private sector as standalone policies, their interaction posits the joint effect and therefore, it is recommended that an accommodating policy environment is a sine qua non for enhancing financial deepening through private sector credit in the Nigeria economy. Therefore, an expansionary fiscal environment while prioritizing productive investments should be accompanied by a moderate monetary environmen
private sector. The study revealed that initially, a percentage increase in both policies significantly increase bank credit to private sector but over time, this expansion causes negative changes in credit availability and cost. In the long run, it was observed that these macroeconomic policies exert significant positive change on bank credit. While these policies have positive effect on credit, their interaction negatively and significantly affect credit growth implying that these policies are complementary. The negative significant effect proves that on the average, an increase in government expenditure worsens the negative impact of interest rate which crowds out private sector investment through credit crunch. While these policies positive and significant
affect bank credit to the private sector as standalone policies, their interaction posits the joint effect and therefore, it is recommended that an accommodating policy environment is a sine qua non for enhancing financial deepening through private sector credit in the Nigeria economy. Therefore, an expansionary fiscal environment while prioritizing productive investments should be accompanied by a moderate monetary environmen
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