DETERMINANTS OF BANKS' LENDING BEHAVIOUR

(A CASE STUDY OF COMMERCIAL BANKS IN NIGERIA)

By

OLOKOYO FELICIA OMOWUNMI CUPG040112

Presented To

Department of Banking and Finance

 ABSTRACT

This study  investigated the  determinant of commercial banks’ lending behaviour in the Nigerian context. The study aimed to test and confirm the effectiveness of the determinants of commercial banks lending behaviour and how it affects the lending behaviour of commercial banks. The model used is estimated using Nigerian commercial banks loan advance (LOA) and
other determinants or variables such as their volume of deposits (Vd), their investment portfolio (Ip), interest (lending) rate (Ir), stipulated cash reserve requirements ratio (Rr) and their liquidity ratio (Lr) for the period; 1980 â€" 2004. The model hypothesizes that loans and advances of commercial banks respond positively to changes in their volume of deposits and negatively to changes in their investments, interest rates, cash reserve ratio and their liquidity ratio. From the regression analysis of the ordinary least square (OLS) and other analysis techniques such as the coefficient of determination, coefficient of multiple regressions, the T-test statistics, the F-test statistics and the Durbin-Watson (DW) test, the model was found to be significant and its estimators turned out as expected and it was discovered that commercial
banks deposits have the greatest impacts on their lending behaviour. The study then suggests that commercial bank should focus on mobilizing more deposits as this will enhance their lending services and should develop credit procedures, policies and analytical capabilities and these efforts need to be expanded into full credit management  including origination, approval,
monitoring and problem management tailored to the needs of each bank.

 TABLE OF CONTENTS  
Front Page - - - - - - - - - - - -       I â€" II
Certification - - - - - - - - - - -        III
Dedication - - - - - - - - - - - - .      IV
Acknowledgement - - - - - - - - - -    V- VI   
Table of Contents - - - - - - - - - - ..   VII - IX
Abstract - - - - - - - - - - - - -    X    
                     
CHAPTER ONE: INTRODUCTION                                                      1- 9
1.1 Background of the Study - - - - - - - -        1-3
1.2 Problem Statement - - - - - - - - - ..         3
1.3 Objectives of the Study - - - - - - - - -          4
1.4 Significance of the Study - - - - - - - - - .      4-5   
1.5 Methodology - - - - - - - - - - -       5-6  
1.6 Scope and Limitation - - - - - - - - -       6-7
1.7 Plan of Study - - - - - - - - - - -      7-8  
1.8 Definition of Terms - - - - - - - - - .      8-9
 
CHAPTER TWO: LITERATURE REVIEW AND THEORETICAL FRAMEWORK                          10 - 36
2.1 Sources of Commercial Banks’ Lending - - - - - .     14 -16     
2.2 Determinants of Commercial Banks’ Lending - - - -     17 - 23
2.3 Lending Objectives of Commercial Banks - - - - .      23 - 25
2.4 Commercial Banks’ Lending And Credit Administration  
      Environment In Nigeria - - - - - - - -      25 - 28  
2.5 The Impact of Lending on the Economy - - - - -      28 - 30  
2.6 Commercial Banks Lending Behaviour - - - - - .      30 - 31
2.7 Principles of Good Lending - - - - - - -       31 - 34
2.8 Limitation to Commercial Banks Lending - - - -       34 - 36  
 
CHAPTER  THREE: METHODOLOGY                                             37 - 42
Introduction - - - - - - - - - - - .           37  
3.1 Variable Description and Data Sources - - - - -            37
3.2 Statement of Hypothesis - - - - - - - -           38  
3.3 Model Specification - - - - - - - - -       39 - 40
3.4 Study Design - - - - - - - - - - ..          41  
3.5 Sample Size - - - - - - - - - -           41
3.6 Instrumentation - - - - - - - - - -           41
3.7 Scope of Study - - - - - - - - - -           41
3.8 Method of Data Presentation and Analysis - - - - .          42       
3.9 Limitation to Data Collected - - - - - - -           42
 
CHAPTER FOUR: PRESENTATION AND ANALYSIS OF DATA   43-52        
Introduction - - - - - - - - - - - ..           43      
4.1 Presentation of Data - - - - - - - - -      44 - 45
4.2 Analysis of Data - - - - - - - - - ..         45
4.2.1 Comparative Analysis of Data - - - - - - ..    45 - 48
4.2.2 Quantitative Analysis of Data - - - - - - -      49
4.2.3 Empirical Results - - - - - - - - - ..    49 - 50   
4.3 Interpretation of Results - - - - - - - -    50 - 52  
 
CHAPTER FIVE:
SUMMARY, CONCLUSION AND RECOMMENDATIONS -- 53 - 57           
5.1 Summary - - - - - - - - - - -       53 - 54  
5.2 Conclusion - - - - - - - - - - .          55
5.3 Recommendations - - - - - - - - -       56 - 57
BIBLIOGRAPHY - - - - - - - - - -       58 - 60
APPENDIX - - - - - - - - - - - ..         61