IMPACT OF FINANCIAL INSTITUTIONS ON ECONOMIC ACTIVITIES IN NIGERIA (A CASE STUDY OF COMMERCIAL BANKS LOCATED IN OWERRI MUNICIPAL, NIGERIA)

Abstract

This study investigates the role of financial institutions, with a focus on commercial banks, in
fostering economic development in Nigeria, particularly in Owerri Municipal. By examining
key banking functions such as fund mobilization, savings allocation, credit creation, short-term
financing, and liquidity support for deficit sectors, the study evaluates the impact of these
activities on Nigeria's economic growth. Using data from senior bank staff and weighted mean
statistics, the findings reveal that fund mobilization and efficient savings allocation are pivotal
in driving sustainable growth, while credit creation enhances business expansion and consumer
spending. However, challenges such as low public trust, regulatory gaps, and high nonperforming loan rates undermine the full potential of banks in supporting economic
development. The study recommends targeted actions from the Central Bank of Nigeria (CBN),
the Nigerian Deposit Insurance Corporation (NDIC), and other key agencies to enhance digital
banking, improve credit risk management, support entrepreneurial funding, and promote green
finance. These recommendations emphasize the need for a balanced approach to banking
practices that foster stability, inclusivity, and transparency. Policy implications suggest that
strengthening regulatory oversight, enhancing digital infrastructure, and fostering public trust
can optimize the economic contributions of commercial banks. The study concludes with
recommendations for further research on the long-term effects of digital finance, the impact of
green finance, and the role of institutional trust in shaping a resilient financial sector in Nigeria.