ASYMMETRIC EFFECT OF CREDIT CHANNEL OF MONETARY TRANSMISSION ON REAL SECTOR OUTPUT IN NIGERIA

Abstract

This study investigates the asymmetric effect of Credit channel of monetary transmission on real sector output in Nigeria over a period of 1980 to 2023. Data for the study were obtained from World Bank Development Indicators (WDI). The data were analyzed using the Non-linear Autoregressive Distributed Lag (NARDL) model. Findings revealed that positive changes in credits to the private sector, small and medium enterprises, the government significantly enhance real sector output, while negative changes in these credits have insignificant impact on real sector output in Nigeria. The study concludes that the effectiveness of credit transmission channel of monetary policy is largely asymmetric in Nigeria, with expansionary credit measures exerting stronger influence on real sector output than contractionary credit measures. The study therefore, recommends that the central bank of Nigeria should implement measures to lower borrowing cost and incentivize financial institutions to extend credits to the private, small and medium enterprises and the government, these strategies would enhance real sector output as well as ensure sustainable economic growth in Nigeria