Determinants of Banking Institutions and Private Sector-Led Economy Growth in Nigeria (1989 - 2013): A Causality Approach

The study evaluates the relationship between determinants of banking institutions and private sector-led economy growth in Nigeria for the period (1989-2013). Secondary data was collected from the CBN statistical bulletin and national bureau of statistics. Hypotheses were formulated and tested using time series econometrics. The test for stationarity proves that the variables are integrated in the order 1(1).There is also a long-run equilibrium relationship between banking institutions and private sector-led economy growth and the result also confirms about 92% short-run adjustment speed from long-run disequilibrium. There is no causality between private sector-led economy growths and banking institutions, but growth rate of manufacturing sector and growth rate of industrial sector granger causes each other. The coefficient of determination indicates that about 84% of the variations in banking institutions are explained by changes in private sector-led economy growth variables in Nigeria. The study recommends that the financial institutions should maintain a high degree of integrity and honesty in their dealing and this will bring trust and good relationship between the operators and the beneficiaries. CBN should implement policies that will increase the flow of investable funds and improves the capacity of banks to extend credit to the economy. CBN should also promote healthy competition in the banking industry so as to improve the efficiency of banks in rendering financial services to the private sector.  An effective training programs should be mounted for the private sector growth this will educate and improve investors on existing business opportunities. Keywords : determinants, banking, institution, private sector, growth, causality approach.