BANK CREDIT TO PRIVATE SECTOR AND ECONOMIC GROWTH IN SUB-SAHARAN AFRICA
Member Ahemen, Ph.D, Sunday Esidiri Akiri. Ph.D and Asongo Simon Ternenge
Volume 4 Issue 1
Abstract
The study is carried out on bank credit to private sector and economic growth in Sub-Saharan Africa on data obtained from World Development Indicator using the period of 1995 to 2021. Anchored on financial intermediation theory, the study adopted system generalised method of moments within dynamic panel data model on a five-year non-overlapping panel data set. The study found that bank credit to private sector exhibits a positive and significant relationship, at one percent level of significance, with economic growth in Sub-Saharan Africa both in the short-run and in the long-run within the study period. Labour force and gross fixed capital formation, as control variables are equally positive and statistically significant though at one percent and ten percent levels of significance respectively in the short run. However, in the long run, labour force and gross fixed capital formation are individually statistically significant at one percent level of significance but with positive and negative impact respectively. Based on the findings, the study recommends that monetary authorities in Sub-Saharan Africa should, through monetary policy, reduce legal reserves requirement for banks to enable the banking sector to create more credit to the private sector of the economy in order to boost economic growth. Key Words: Bank Credit, Private Sector, Economic Growth, Sub-Saharan Africa, System Generalized Method of Moments
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