DETERMINANTS OF DEPOSIT MONEY BANKS? CREDIT TO MANUFACTURING SECTOR IN NIGERIA

The study investigated the determinants of Deposit Money Banks (DMBs) credit to manufacturing sector in Nigeria. Specifically, the effect of macroeconomic factors proxied by inflation rate (INF), liquidity ratio (LQD), loan to deposit ratio (LTD) and prime lending rate (PLR) on DMBs'credit was evaluated. Annual data on selected DMBs were taken from the CBN statistical bulletin from 1986 –2021.Augmented Dickey-Fuller test (ADF) and Autoregressive Distributed Lag (ARDL) estimation techniques were employed. Results revealed that INF and PLR have positive but insignificant effect on DMBs' credit in the long run. Also LTD ratio has positive significant effect in the short run, while LQD affects banks' credit negatively both in the short and long run. Moreover, results showed short run causality from explanatory variables to deposit money banks' credit. The study concluded that INF, LTD, LQR and PLR are critical factors that influence DMBs'credit to manufacturing sectors. Therefore, the study recommends that Central Bank of Nigeria should implement favorable monetary and macroeconomic policies so as to facilitate banks' lending to Nigerian manufacturing firms thereby enhancing economic growth.