Determinants of Lending Behaviour Of Commercial Banks: Evidence From Nigeria, A Co-Integration Analysis (1975-2010)

Abstract

The research study takes a look at determinants of lending behaviour of commercial banks in Nigeria: a Co-integration analysis between 1975 to 2010. However, the study make use of secondary data and series of Econometrics techniques were adopted, to justify the long run relationship between Commercial bank and its lending behaviour over the period of analysis. More over, the study investigates the level of commercial banks loan advances in Nigeria and to also examine those various determinants of commercial banks lending behavior in Nigerian. More so, the model used is estimated using Nigerian commercial bank Loan and advances (LOA) and other determinants such as Volume of deposits (Vd), annual average exchange rate of the naira to dollar (Fx) for the period of thirty-seven (37) years, Investment Portfolio (Ip), Interest rate (lending rate) (Ir), Gross domestic product at current market price (Gdp) and Cash reserve requirement ratio (Rr). However, the model result reveals that there is positive relationship between Loan and advances and Volume of deposits, annual average exchange rate of the naira to dollar, Gross domestic product at current market price and cash reserve requirement ratio except Investment portfolio and Interest rate (lending rate) that have a negative relationship. It was also revealed from the result that there is a long run relationship between Loan and advances and all the explanatory variables in the model and this shows that commercial bank has a lot of impact of their lending behaviour. Finally the study recommend and conclude that commercial bank should endeavour to create more deposit in other to improve their lending behaviour and should enforce the most easily realizable policies and good credit management in every situation.