Sectoral Allocation of Deposit Money Bank’s Credit and Mining Sector Performance in Nigeria

ABSTRACT :In this paper, the impact Deposit Money Bank (DMBs) credit on mining sector performance in Nigeria between 1981 and 2019 was examined. Descriptive statistics, Phillips-Perron unit root test, cointegration test and error correction mechanism were relied upon for data analysis. The unit root test results show that all the variables are stationary at first difference. It was observed from the Johansen cointegration test that the variables have long run relationship. This provides the pre-condition for fitting the error correction model. The parsimonious ECM results revealed that banking sector credit to the mining and quarrying sector was not significant in explaining changes in mining sector’s performance. This may be linked to the low value addition and poor linkage with other sectors of the economy. Interest rate was significant in explaining changes in the performance of the mining sector in Nigeria. This confirms the critical role of cost of fund in investment decision and the performance of the economy at large. Additionally, inflation rate was also critical in explaining changes in the performance of the entire sector. Given the findings, the study recommends for business friendly interest rate and improve infrastructure and business environment in the mining sector.
KEYWORDS: Bank credit, mining sector, Deposit Money Bank, Interest rate, inflation rate and Nigeria