Impact of Intermediation of Commercial Banks on Capital Formation in Nigeria
1Mr Byyiyet Josiah Jacob,2Mr Muawiyya Adamu Koko,3Mrs Lois Anuoluwapo Ajay,4Dr Garba Ado
1Department of Banking and Finance, Ahmadu Bello University, Zaria Kaduna State.
2Department of Banking and Finance, Federal polytechnic, Kaura Namoda Zamfara State.
3Department of Management and Accounting, Ladoke Akintola University of Technology Ogbomosho Oyo state.
4Department of Economics, Ahmadu Bello University, Zaria Kaduna State.
https://doi.org/10.47191/jefms/v6-i2-36ABSTRACT:
This study examined the impact of intermediation of commercial banks on capital formation in Nigeria. A sample of fifteen (15) banks listed on the NSE between 2000 to 2019 was utilized by the study and data was gathered mainly through secondary sources. The study employed time-series data and ex-post facto research designs to establish the impact of total deposit liabilities, credit to private sector and bank investment on the gross fixed capital formation in Nigeria. The data was analysed using the ordinary least square (OLS) regression technique after conducting series of diagnostic tests, multicollinearity, serial correlation, normality, heteroskedasticty and stationarity tests. The study documented negative and statistically significantly between total deposit liabilities and gross fixed capital formation. Furthermore, results from the regression analysis established positive and significant impact of credit to private sector on the gross fixed capital formation in Nigeria. Further analysis revealed a positive and insignificant impact between bank investment and gross fixed capital formation in Nigeria. The study concluded that total deposit liabilities, credit to private sector play major role in influencing capital formation in Nigeria while bank investment does not influence capital formation in Nigeria. The study therefore recommended among others that adequate efforts be made by commercial banks to increase their level deposits as that will help in increasing the nation’s capital formation. This will most likely result into increased investment activities which will enhance capital formation in Nigeria needed for its real sector investments and industrial growth. It was also recommended that Commercial banks credit department should advance more credit to private sector used for economic activities that will impact the real economy like the manufacturing and agricultural sectors
REFERENCES:
1) Allen, F., Gu, X., & Kowalewski, O. (2018). Financial structure, economic growth and development. In handbook of
finance and development. Edward Elgar Publishing.
2) Asagunla, T.M., & Agbede, M.O. (2018). Oil Revenue and Output Greowth in Nigeria. International Journal of Economics
and Business Management, 4(6), 65-74. http://www.researchgate. net/publication/330349079.
3) Bakare, A. S. (2011). A theoretical analysis of capital formation and growth in Nigeria. Far East Journal of Psychology
4) Beddies, M. C. H. (1999). Investment, Capital Accumulation, and Growth: Some Evidence From the Gambia 1964-19+
L165298 (No. 99-117). International Monetary Fund.
5) Calza, A., Gartner, C., & Sousa, J. (2003). Modelling the demand for loans to the private sector in the euro area.
Applied economics, 35(1), 107-117.
6) Chukwunonso, S.,Ogonna, E., Clement, I., & Anthony, O. (2016). Analysis of savings and private capital formation in
Nigeria. Research on humanities and social sciences, 6(12), 2224-5766.
7) Elser, L. (1999). Strict Dollarization and Economic Performance: An Empirical Investigation.Journal of Money, Credit &
Banking, Eschborn, Washington DC.
8) Ezirim, C. B., Torbira, L. L., & Amuzie, A. E. (2016). Financial Intermediation by insurance companies and capital
formation: Theory and Empirical Evidence from Nigeria. International journal of Business, Accounting, & finance, 10(2).
9) Henry, W., Lucky, A., &Anyamaobi, C. (2016). Banking sector development and capital formationin Nigeria: A
multivariate Analysis. Account and financial management journal, 1(3) 141-161.
10) Jacob, B.J., & Innocent, I.O. (2019). Effect of Deposit mobilization and Credit financing of Commercial Banks on Capital
Formation in Nigeria. International journal of small and medium Enterprises, 2(1), 50-58.
11) Jhingan M. L. (2001), Money, Banking, International Trade and Public Finance.(6th Revised and Enlarged Edition).Vrinda
Publications (P) Ltd, Delhi, India
12) Mohan, S. (2012). Perspectives of Deposit Mobilisation. online publication.
13) Ogar, A. & Oba, F. (2017). Impact of financial deepening on capital formation in Nigeria. International journal of
research in management & social sciences, 5(11), 2322-0899.
14) Ogundajo, G.O., Onakoya, A.B., Enyi, E.P. & Siyanbola, T.T. (2019). Financial Institutions’ Inter Mediation and Economic
Development in Nigeria. Journal of Accounting and finance in Emerging Economics, 5 (1), 33-46.
15) Okoroafor, O. K., David, M. S., & Eze, J. U. (2018). Impact of deposit money banks on capital formation in Nigeria: 1980-
2015. International Journal of Current Research in Life Sciences, 7 (8), 2570-2577.
16) Paschal, O, Chibueze, A., & Callistus, O. (2016). Bank credit and capital formation in Nigeria. Journal of policy and
development studies 10(2), 157-9385.
17) Patrick, H. T. (1966). Financial development and economic growth in underdeveloped countries. Economic development
and Cultural change, 14(2), 174-189.
18) Skare, M., Sinkovic, D., & Porada-Rochon, M. (2019). Measuring credit structure impact on economic growth in Croatia
Using (VECM) 1990-2018. Journal of Business Economics and Management, 20(2), 294-310.
19) Venkati P (2016) Impact of banks deposit mobilization and credit financing in capital formation. International research
journal of marketing and economics. 3(6), 2349-0314.
