Impact of macroeconomic factors on non- performing loans in the Nigerian deposit money banks
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Date
2016
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Amity Global Business Review, Amity International Business School, Amity University, Noida, India
Abstract
Banking sector in Nigeria over the years has witnessed a number of crises that led to the distress of many banks. The crises, was caused and fueled by the high figures of non-performing loans and loan loss provisioning among other factors. This study therefore, investigated the factors responsible for non -performing loans in the Nigerian deposit money banks. A time series data were collected from Central Bank of Nigeria (2013), Financial Statistical Bulletin that covered the period 1990 to 2013. The study adopted Ordinary Least Squared technique via Error Correction Model to assess the non-performing loans and macroeconomic variables. The findings revealed that, Inflation, foreign exchange rate and credit to the private sectors are statistically significant with non-performing loans while Gross Domestic Product, Money Supply have no significant relationship with non-performing loans of the deposit money banks in Nigeria. Based on the findings, it was recommended that Central Bank of Nigeria should develop an institution that could take care of the effects of macroeconomic fluctuation in banks especially during inflation, currency devaluation and economic recession. In conclusion, deposit money banks in Nigeria should put into consideration macroeconomic factors when offering loans in order to avoid the incidences of non-performing loans.
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Keywords
Deposit Money Banks, Foreign Exchange, Inflation, Non-performing loans, Macroeconomic factors