EFFECT OF BANK SPECIFIC AND MACRO-ECONOMIC FACTORS ON NONPERFORMING LOANS OF LISTED DEPOSIT MONEY BANKS IN NIGERIA

Abstract

The level of non-performing loan in Nigeria has being on the increase without adequate empirical evidence to explain or arrest this ugly situation. Credit risk is one of the prominent areas of focus both by the individual money deposit banks as well as the regulatory bodies. The risk of default is often associated with loan disbursement. Hence, this study considered the Impact of Bank specific and Macroeconomic factors on Nonperforming Loans in Nigeria from 2008-2020. The study made use of time series data obtained from the central bank of Nigeria statistical bulletin and disaggregated data collected from 12 quoted money deposit banks in Nigeria. Regression analysis was employed after all diagnostic tests have been well accounted for. The stata13 output revealed that capital adequacy ratio and lending rate has insignificant and significant negative impact on nonperforming loans respectively while, loan-deposit-ratio and crude oil price has insignificant and significant positive impact on nonperforming loans of the commercial banks. The study recommends diversification of loan portfolios, increase in prime lending rate among others.