Most empirical researches on bank lending channel suffered from what is known in the literature as identification problem, i.e. failure to disentangle the origin of the monetary-policy-induced shocks in bank loans either the supply side or the demand side. The bank lending channel is only said to be present if the shock originates from supply side. This paper aimed at offering solution to this problem in Nigeria using aggregate data covering the period 1986:1 to 2015:4. Two different techniques of unit root tests were employed to determine the order of integration among the variables - the traditional unit root tests and unit root tests that allow for structural breaks in the series. Both test results suggest mixed order of integration in the series. An Autoregressive Distributed Lag (ARDL), which is a representation of two Error Correction Model are devised to capture the bank loan supply and loan demand in private sector credit market, was developed and implemented (bounds test procedure)to identify the bank loan supply and bank loan demand impacts of monetary policy shocks, The result indicates that adjustment of bank loans is more stronger in the direction of loan supply, suggesting that monetary-induced shocks in private sector credit market emanate from the supply side and an indication that the bank lending channel is active.

Keywords: Monetary Transmission Mechanism, Bank Lending Channel, Loan Demand, Loan Supply, Ardl, Nigeria