Impact of inflation on bank credit and economic growth in Nigeria

The study on inflation rate on bank credit and economic growth is designed to evaluate the impact of inflation rate on bank credit and economic growth of Nigeria. The population of the study is made up the entire sectors of the economy and the 23 deposit money banks in Nigeria and the sample of the study is made up of the central bank of Nigeria statistical bulletin (CBN), National bureau of statistics (NBS) and the consolidated statement of assets and liabilities of commercial banks in Nigeria from 2008 to 2019.The data is secondarily sourced from CBN and NBS. The study employed both descriptive and inferential statistics with a panel research design. This study revealed that bank credit increases as inflation rate increases as against that of several economies and the amount of bank credit increases as inflation increases even against the hike in lending rate of commercial banks .This is a proof that investors yet resort to more liquid assets to meet the increase in income ,employment, prices, demand on a commensurate level of output to bring an equilibrium thereby equating demand and supply to stabilize prices by market forces in the economy against monetary authorities manipulations to reduce money supply through the increase in lending rates thereby decreasing investments, employment ,income, prices and output but dare to attain stabilize prices through a slack in the macroeconomic variables to regain the value of money. The study revealed a positive relationship exist between inflation and gross domestic product in Nigeria even when it attained the hyper-inflationary state yet supported economic growth as contrasted in several economies in the world because of risk, innovations and technological know-how which are not controlled by the banking system. This implies that inflation has a negative impact on bank credit and economic growth. The study recommends that during inflation, the monetary policy authorities should monitor and effectively manipulate monetary policy rate and through moral suasion ensure banks adjust their loan portfolio to real economic sectors to enhance the increase in the production (supply) of goods and services to improve the level of output to exceed or be at equilibrium with demand to maintain the value of money. The CBN should also ensure that commercial banks receive and provide foreign exchange services through strict supervision to enable a near stable exchange rate amidst inflation for the purchase of inputs across national borders as well as facilitate exchange.