DEPOSIT MONEY BANKS’ CREDIT AND UNEMPLOYMENT REDUCTION IN NIGERIA: A TIME SERIES APPROACH (1991–2022)

Abstract

This study investigated the influence of Deposit Money Banks’ (DMBs) credit to reducing the level of unemployment in Nigeria between 1991 and 2022. The study used annual time series data obtained from the Central Bank of Nigeria, the World Bank, and the International Labour Organization (ILO) websites and journals. The study adopted the Autoregressive Distributed Lag (ARDL) model and is based on the monetarist theoretical framework. Findings from the study revealed a long-run cointegrating relationship exists between DMB credit, interest rates, and unemployment, even though the direct effect of credit from DMB on unemployment reduction was found to be statistically insignificant. Interest rates, however, had short-run positive effects on employment when it is low, but stalled job creation in the long run when interest rate is higher. The study concluded that while DMB credit is vital for investment and economic expansion, structural and institutional inefficiencies limit its impact on employment generation. Policy recommendations include among others, a comprehensive reforms of credit accessibility, optimal management of interest rate, and inclusion of monetary tools with job-creation objectives.