Macroeconomic determinants of bank lending behaviour in Nigeria
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Date
2014-09
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Institute of Chartered Accountants of Nigeria Journal of Accounting and Finance (IJAF). Published by the Institute of Chartered Accountants of Nigeria (ICAN).
Abstract
Lending activity is possible through bank's mobilization of funds from their customers. Banks depend on depositor's money as a source of funds and this means that there is a relationship between the ability of the banks to mobilize deposits and the amount of credit granted to the customers. This study therefore examined the effect of macroeconomic variables on banks’ lending behaviour in Nigeria. A time series data were collected from Central Bank of Nigeria (CBN) 2072 Financial Statistical Bulletin that covered the period 1990 to 2012. The study adopted a simplified Ordinary Least Squared (OLS) technique and also conducted the unit root and co-integration tests. The findings of the study revealed that, Gross Domestic Product (GDP), Inflation (INF), Money Supply (M2), Lending Rate (LR), were found to be statistically significant in determining lending portfolio behaviour of deposit money banks in Nigeria. However, the study discovered that foreign exchange rate (N/S) has no significant relationship with banks lending behaviour in Nigeria. The implication of this finding is that macroeconomic variables have a significant influence on the lending behaviour of banks in the Nigerian economy. The study recommends that all macroeconomic policies of the government through its monetary and fiscal policies should be co-ordinated to complement each other in order to attain the goals of price stability, sustainable growth, conducive and business friendly environment so as to encourage high level of credit demand and absorption in the Nigerian economy.
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Keywords
Lending Portfolio, Bank Behaviour, Macroeconomic, Determinants, Deposit Money Banks