The "l"s are intended to indicate the sort of 'diddle' you might sing if you were imitating the sound of a banjo. For example, sing a tune (e.g., "Dueling Banjos"). Make your voice sound continuously and make the notes completely legato. However, use your tongue against your palate to say "diddle" quickly repeatedly and it sounds (vaguely :-) like a banjo.
Below is the ABC for the version sung by Sarah McLachlan. It's slightly different from the tune posted by leeneia.
Personally, I like the lyric posted by Stoepsitter and the one posted by Katie Rose better than the one that Sarah recorded. At the same time, I prefer Sarah's melody to leenia's. *shrug* De gustibus non est disputandum.
BB,
NightWing
X:1
T:The Banjo Song
Z:Transcribed by NightWing, as sung by Sarah MacLachlan
S:Downloaded from https://www.aquezada.com/sarah/miscinfo.shtml#banjo
L:1/4
M:3/4
Q:1/4=200
K:Bb
Fd2 | cd2 | cB2 | AB2 | GF2 | Bd2 | Bc2-|c3 |
w:I used to have an old ban-jo that rests up-on my knee._
w:I took it to the man~at the shop to see what he could do._
Fd2 | cd2 | cB2 | AB2 | GF2 | Bd2 | cB2-|B3 :|
w:But now the strings are bro-ken and it's no more use to me._
w:He said the strings are bro-ken and it's no more use to you._
K:B
Fd2 | cd2 | cB2 | AB2 | GF2 | Bd2 | Bc2-|c3 |
w:So now I have a new ban-jo that rests up-on my knee._
Fd2 | cd2 | cB2 | AB2 | GF2 | Bd2 | cB2-|B3 |]
w:The strings aren't bro-ken and it's lots of use__ to me._