Bank Credits and Growth of Hospitality Industry in Ekiti State, Nigeria
Author: Olaiya, Adeniyi Clement & Oluwole, Foluso (Ph.D.)
Abstract: Business operators in the hospitality industry have not been able to get adequate credits from banks in Ekiti State. Most of these businesses resulted in sourcing funds from families, friends, cooperative societies, and other informal sources as against securing loans from banks that are more appropriate for their business needs. High-interest rates and stringent conditions like collateral security are some of the impediments faced by practitioners in the hospitality industry. Despite evidence obtained from previous studies that showed a positive relationship between bank credits and growth in different sectors of the economy, most studies on the hospitality industry had not focused on the sourcing of funds. Enough attention had not been given to the relationship between bank credits and growth in the hospitality industry, hence, the need for this study. Six local government areas (LGAs) were selected as samples from the sixteen LGAs of Ekiti State comprising of three senatorial districts using a multi-stage sampling technique. Using Yammane’s (1967) formula of sample size determination, five hundred and five (505) copies of questionnaires were administered. Data were analyzed using descriptive and ordinary least square regression analysis. With a positive correlation (0.872) and an adjusted R square of 76%, the study found that bank credits positively and significantly stimulated profitability of the hospitability industry at 5% confidence interval. This means an increase in bank credits led to an increase and growth in the hospitality industry. The study concluded that bank credit was positive and a significant determinant of the growth of the hospitality industry in Ekiti State. It was, therefore, recommended that policymakers and government through the Central Bank of Nigeria (CBN) should reduce the lending interest rate to a one-digit number, instead of the current rate of 25% on average in order to encourage expansion of the hospitality industry in Ekiti State. Also, banks are encouraged to give priority to lending requests from the hospitality industry as well as reduce their interest in them in order to stimulate growth in the hospitality industry.