Research Article Open Access

Has Post Consolidation of Deposit Money Banks Affected the Real Sector?

Abstract

Deposit money banks (DMBs) are believed to be the engine for real economic growth. DMBs are expected to adequately cover the funding gap of the real sector by government resulting from market shocks, especially in developing countries like Nigeria. In this light, this paper examined the effect of post consolidation activities of Nigerian deposit money banks on real sector development. The interactive influences of the Real Sector Gross Domestic Product (RSGDP) and other post consolidation variables like Commercial Banks Deposit (CBD), Credit to Private Sector as a percentage of GDP (CPGDP), Number of Banks Branches (NBB), Commercial Banks Capital (CBC) and proxy of Political Stability (POL) were measured. Analyzing time series data ranging from 1981-2014, the econometric results obtained from co-integration test, unit root test, causality test, over parameterization model and error correction model (ECM) revealed the following: (1) the existence of a significant longrun relationship among the variables and three co-integrating relationships at 1% level of significance; (2) there is convergence of the variables from the short run to the long run though with relatively low speed of adjustment; (3) there is a significant negative relationship between RSGDP and banks’ deposit, credit to the private sector and number of branches but positive relationship with banks’ capital and political stability. The paper thus concludes that the post consolidation activities of Nigerian DMBs have not sufficiently supported sustainable real sector development in Nigeria.

Achugamonu BU, Babajide AA, Olokoyo FO and Adeshina T

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