Ejezube, S. C., Aronu, C. O. and Ugwu, N. D.

DOI: 10.26480//bedc.01.2025.23.30

ABSTRACT
This study investigates the dynamic relationship between the expansion of commercial banks, key monetary indicators, and economic growth in Nigeria from 1981 to 2021. Using secondary data from the Central Bank of Nigeria, the study explores how changes in the number of commercial banks (NCB) influence macroeconomic aggregates such as total savings (TS), money supply (MS), credit to the private sector (CPS), and GDP growth (GDPG). Descriptive and normality assessments were conducted, followed by stationarity testing using the Augmented Dickey-Fuller (ADF) method. To account for the mixed order of integration among variables, the Autoregressive Distributed Lag (ARDL) bounds testing approach was applied to determine long-run cointegration relationships. Results reveal significant long-term relationships among the variables, with credit to the private sector and GDP growth exhibiting positive and statistically significant impacts on bank expansion. Conversely, total savings and money supply negatively affect the number of commercial banks, suggesting potential inefficiencies in financial intermediation. The error correction model shows a strong adjustment mechanism toward equilibrium, with approximately 75% of disequilibrium corrected within a year. The findings have important policy implications, underscoring the need for efficient channelling of savings and liquidity, robust credit policies, and macroeconomic stability. This research contributes to the empirical literature by providing a comprehensive, time-series-based understanding of Nigeria’s financial sector dynamics and offers evidence-based insights for enhancing the efficacy of banking sector reforms and monetary policy frameworks in developing economies.

KEYWORDS
Commercial Bank Expansion, Money Supply, Economic Growth, ARDL Cointegration, Credit to Private Sector. Nigerian Economy