Macro-Economic Determinant of Non-Performing Loan in Nigeria

Abstract

The study examined the macro-economic determinant of non-performing loan in Nigeria. The independent variables used are real interest rate (RERAT), inflation (INFLA), rate of exchange (RATE), and unemployment (UNEMP) and the dependent variable is nonperforming loan (NPLs) measured by bank non-performing loans to total gross loans (%). The ex post facto resign design was explored. Secondary time series data obtain from World Bank indicators spanning through 2013 through 2022 was used. Different statistical test was executed with the aid of Econometric Views 9.0. From the analyses, results showed that RERAT and INFLA has positive minor effect on NPLs of banks in Nigeria. While, RATE and UNEMP has a negative trivial effect on NPLs of banks in Nigeria. The study concludes that, the macroeconomic variable of the study is a weak determinant of NPLs of banks in Nigeria. The study recommends that: monetary regulators should look into real interest rate as well as fixing of prices in favour of banks since they have positive impact on NPLs. Also, internal variables of the banks should be evaluated in order to expose what actually endear loan nonperformance in financial service sector.