Macroeconomic Variables and Non-Performing Loans of Banks in Nigeria

Abstract

The banking sector holds immense importance in any economy. However, the non-performing loans of Nigerian banks are a concern for the economy and financial stability. This can be attributed to the effects of macro-economic factors on banking activities in the country. The study aimed to examine macroeconomic variables and the non-performing loans of banks in Nigeria. A descriptive research design method was used for the study. Secondary data were collected for the period from 1990 to 2021. The auto regressive distributed lag (ARDL) error correction model was used for data analysis. The study’s results show that tax revenue, recurrent expenditures and the real interest rate will in the long run resolve the problems of non-performing loans of banks in Nigeria. Contrarily, money supply and exchange rate, if not properly managed, may amplify non-performing loans of banks in Nigeria. The study concluded that macroeconomic variables, when properly devised, will help subdue the problem of increasing non-performing loans in Nigeria.