SECTORAL CREDIT ALLOCATION, INTEREST RATE POLICY, AND ECONOMIC GROWTH IN NIGERIA: A MANUFACTURING AND AGRICULTURAL PERSPECTIVE

This study examines the impact of credit allocation on economic growth in Nigeria, highlighting the critical role of sectoral distribution in enhancing productivity and driving structural transformation. Efficient credit allocation is essential for fostering growth, particularly in developing economies, as it channels financial resources to high-yield sectors such as agriculture, manufacturing, and services. Employing empirical data, we find a positive correlation between credit given to the manufacturing sector and gross domestic product (GDP), while credit allocation to agriculture shows a negative and insignificant relationship. The Central Bank of Nigeria's role in adjusting nominal interest rates is crucial for optimizing credit distribution and enhancing economic performance. Our findings suggest that targeted policies aimed at improving access to credit for the production sector are necessary to sustain economic growth. Furthermore, the study emphasizes the complex dynamics of credit's effects on growth, noting the short- and long-term implications observed in prior research. The analysis underscores the importance of stable credit creation and interest rate regulation, while also addressing the challenges posed by exchange rate volatility. This investigation contributes to the understanding of credit allocation as a pivotal element in Nigeria’s economic development.

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