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Private Sector Credit Provision in Periods of Fluctuating Capital Inflows in Nigeria: Does each Regime Change Influence Credit Provision Differently?

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  • Nzeh, Innocent Chile

    (Department of Economics, Renaissance University, Ugbawka, Enugu State, Nigeria)

  • Benedict I. Uzoechina

    (Department of Economics, Nnamdi Azikiwe University, Awka, Anambra State, Nigeria)

  • Millicent Adanne Eze

    (School of Business and Social Sciences, Abertay University, Dundee, United Kingdom)

  • Chika P. Imoagwu

    (Department of Economics, Nnamdi Azikiwe University, Awka, Anambra State, Nigeria)

  • Ozoh Joan Nwamaka

    (Department of Economics, Nnamdi Azikiwe University, Awka, Anambra State, Nigeria)

Abstract

Our study aims to find the link between capital inflows and credit to private sector over a period of 2010M01-2021M08 and to identify if the behavior of banks’ credit in each regime differ. Under the framework of ARDL, in the first sub-sample, findings show that capital inflows negatively impacts on credit to private sector in the short-run, while in the long-run, the impact is positive though not significant. The study also finds that the interaction of capital inflows with the dummy variable leads to a positivesignificant impact of capital inflows on credit to private sectorin the short-run. In the second sub-sample, findings show that the impact of capital inflows on credit to private sector is positive but not significant both in the short-run and in the long-run. However, when capital inflows interact with the dummy variable, the impact on credit to private sector is negative and significant in both the short and long-run. Consequently, we recommend that different policy measures should be adopted to suit different shocks to the macroeconomic environment.

Suggested Citation

  • Nzeh, Innocent Chile & Benedict I. Uzoechina & Millicent Adanne Eze & Chika P. Imoagwu & Ozoh Joan Nwamaka, 2022. "Private Sector Credit Provision in Periods of Fluctuating Capital Inflows in Nigeria: Does each Regime Change Influence Credit Provision Differently?," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 6(1), pages 98-113, January.
    • Handle: RePEc:bcp:journl:v:6:y:2022:i:1:p:98-113
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    References listed on IDEAS

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    1. Baskaya, Yusuf Soner & di Giovanni, Julian & Kalemli-Özcan, Şebnem & Peydro, José-Luis & Ulu, Mehmet Fatih, 2017. "Capital flows and the international credit channel," Journal of International Economics, Elsevier, vol. 108(S1), pages 15-22.
    2. M. Hashem Pesaran & Yongcheol Shin & Richard J. Smith, 2001. "Bounds testing approaches to the analysis of level relationships," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 16(3), pages 289-326.
    3. Perron, Pierre, 1997. "Further evidence on breaking trend functions in macroeconomic variables," Journal of Econometrics, Elsevier, vol. 80(2), pages 355-385, October.
    4. Jeannine Bailliu, 2000. "Private Capital Flows, Financial Development, and Economic Growth in Developing Countries," Staff Working Papers 00-16, Bank of Canada.
    5. Stephen Leybourne & Paul Newbold, 2003. "Spurious rejections by cointegration tests induced by structural breaks," Applied Economics, Taylor & Francis Journals, vol. 35(9), pages 1117-1121.
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