Sectoral Credit Allocation and Economic Growth in Nigeria: A Comparative Analysis of Oil, Manufacturing, and Agriculture

Abstract

This study examined the relationship between sector-specific credit allocation to the agricultural, manufacturing, and oil sectors and economic growth in Nigeria. The results showed that credit to the agricultural sector positively affected economic growth, indicating that targeted financing enhances production capacity, livelihoods, and per capita income, even though some effects were small or
statistically insignificant, highlighting the need for additional policies to improve productivity. Conversely, credit to the manufacturing sector had a negative correlation with growth, suggesting that inefficiencies in credit use, structural issues, or misaligned lending can prevent the effective transformation of financial resources into productive output. Credit to the oil sector had a positive effect, reflecting its crucial role in government revenue, foreign exchange earnings, and investment flows. Overall, the findings imply that the growth impact of sector-specific credit depends on proper allocation, the sector’s ability to absorb funds, and a supportive macroeconomic and policy environment. The agriculture and oil sectors showed the strongest positive effects, while manufacturing credit requires better management to foster growth.