Credit Market, Investment Productivity and Economic Development

Credit markets are established globally to provide funds for investment and foster economic development. Despite reforms to strengthen Nigeria's credit market, the nation's economic progress remains unsatisfactory. This study addresses the gap in understanding the link between credit market development, investment productivity, and economic growth in Nigeria. Using the Error Correction Model (ECM) and time series data from the CBN, World Bank, and IMF, findings reveal a negative relationship between credit market development and economic growth, suggesting that economic progress does not necessarily improve with credit market expansion. Additionally, investment impacts economic development after a two-year gestation period. The study recommends granting investors a one-year moratorium before loan repayment begins and maintaining moderately high deposit and lending rates to encourage savings and promote efficient investments.