Microprudential Regulations and Bank Lending in Nigeria

Abstract

Objectives: The current study aimed at investigating the relationship between microprudential regulations and bank lending in Nigeria. Theoretical framework: The theoretical underpinning of the study is drawn on the theory of risk-return tradeoff which maintains that potential return rises with an increase in risk. Method: Financial data of 13 banks over a period of 15 years were sourced from the repository of Central Bank of Nigeria, and were analyzed using the Panel (Least Squares) Multiple regression technique. Results and Discussions: The result of analyses revealed a high R-squared value of 0.75, an indication that microprudential regulation accounted for 75% variation in profitability in the Nigeria banking institution. Also, the F-statistic of 101.31 and a p-value of 0.000, indicated that the Ordinary Least Square regression model is statistically significant at the 1% level. Overall, microprudential regulation impact on lending and profitability in Nigeria. Research Implications: More so, the study’s relevance is evident in its applications to the principles and practice of lending, fund mobilization and other finance related policies and decisions in the banking sector. Originality/ Value: The outcome of the current study is valid and can be used for statistical inference. The conceptual framework of the study is a novel model that demonstrates how the variables in the study are interconnected. Furthermore, the model specification presents a viable template for financial speculations and calculations.