IMPACT OF BANK-SPECIFIC FACTORS AND MACROECONOMIC VARIABLES ON NONPERFORMING LOANS OF LISTED DEPOSIT MONEY BANKS IN NIGERIA

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Author

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Department of Administration

ABSTRACT

The study examines the impact of bank-specific factors (loan loss provision, capital adequacy ratio and loan to total asset ratio) and macroeconomic variables (exchange rate and crude oil prices) on nonperforming loans of listed deposit money bank in Nigeria. The study used secondary sources of data, which is panel data in nature, over the period 2006-2015. Random effect model was used to examine the determinants of nonperforming loans of listed deposit money banks in Nigeria. The study finds that loan loss provision ratio, loan to total asset ratio and crude oil prices have significant impact on the nonperforming loans of listed deposit money bank in Nigeria. The study also finds that exchange rate volatility and capital adequacy ratio have positive but not significant impact on nonperforming loans. The study concludes that loan loss provision, loan to total asset ratio and crude oil price are major determinants of nonperforming loans of listed deposit money bank in Nigeria. It recommends that bank managers should maximize portfolio in less risky assets with fixed assets, and that bank management and loan officers pay serious attention to asset quality of banks. The study also recommends that banks take special cognizance of the likely impact of falling in crude oil prices before granting loans request to customers in oil and gas sector and that government needs to formulate policies to promote greater exchange rate stability.


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