The Social Sciences

Year: 2016
Volume: 11
Issue: 24
Page No. 5838 - 5844

Bank’s Intermediation Role and Industrial Output in Developing Economies

Authors : Felicia O. Olokoyo, Kehinde A. Adetiloye and Ochei A. Ikpefan

Abstract: Nigerian banks perform their financial intermediation role in such a way that makes them unable to mobilise funds for production. Over the years, the lending rates have increased and thus hindered investors from borrowing funds. This has contributed to the slow process of industrialisation in the country. The central focus of the study is to determine the role that Deposit Money Banks play in promoting industrialisation in Nigeria and how high lending rates have affected industrial output, thus slowing down the process of industrialisation. The empirical relationship between bank credit and industrial output was tested in this study using the Johansen Co-integration test. The findings revealed that there is an inelastic relationship between bank credits and industrial output in the long run. It was also discovered that high lending rates greatly affects industrial output and thus industrialisation development. Therefore, a policy to reduce lending rates so as to foster industrialisation and thus economic growth in Nigeria was recommended. This study concludes that banks are important catalysts for industrialisation however; deposits money bank needs to perform their financial intermediation role more efficiently and effectively as no economy can achieve growth in the absence of adequate credit to its real sector.

How to cite this article:

Felicia O. Olokoyo, Kehinde A. Adetiloye and Ochei A. Ikpefan, 2016. Bank’s Intermediation Role and Industrial Output in Developing Economies. The Social Sciences, 11: 5838-5844.

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