This paper explored the nexus between sectoral credit distribution and economic growth in Nigeria from 1981 to 2020 by examining the effect of deposit money banks credits to the agricultural, industrial and service sectors on real gross domestic product (GDP). In doing this, the study accounted for the role of financial development and adopted the unit roots, cointegration and Toda and Yamamoto granger non-causality techniques. The result of the Engle and Granger cointegration test reveals no long run equilibrium relationship between deposit money banks credit to agricultural sector, industrial sector, service sector, financial development and real GDP. The result of the causality test reveals that demand-led hypothesis holds in Nigeria as unidirectional causality was found running from real GDP to financial development. Also, the study found bi-directional causality between credit to agricultural sector and industrial sector. Results show unidirectional causality from financial development to deposit money banks’ credit to the service sector. The work recommends that the Central Bank of Nigeria (CBN) should set up a real sector credit scheme and ensure that commercial banks disburse credit facilities at an interest rate in the region of 7 – 14 percent.
Olufemi Adewale Ogundipe (Sat,) studied this question.