Pages: (26-42 )
Abstract
The study examined the role institutions of governance play in the linkage between banking development and manufacturing sector in Nigeria for the period 1980 to 2018 employing the Autoregressive Distributed Lag (ARDL) bounds testing to co-integration approach. The overall result disclosed a non-negative institutional impact on the banking-manufacturing nexus. With the exception of bank credits share to manufacturing sector and interest rate spread indicators, all the explanatory variables had a positively significantly impact on manufacturing GDP. However, measures of bank assets ratio, share of credit to manufacturing sector and manufacturing capacity utilization were statistically significant at 5% level. This findings suggests that the banking industry development may unlikely spur value-added output growth of the manufacturing industries without quality institutions of governance to foster a value-chained developmental processes across other sectors of the economy. Therefore, the policy prescription emerging from this study is the need to continuously pursuing institution-led financial sector developments that would activate capacity utilization of the manufacturing sector through access to, and usage of, a range of financial services such as digital savings/payments, credit, remittances, among others, for the attainment of an increased value-added manufacturing output growth which ultimately will guarantee national economic prosperity in the country.
Keywords: Deposit money banks, Manufacturing sector, Institutional structure, Value-added output growth, ARDL bounds testing, Cointegration,