Macroeconomic risks and financial sector stability: the Nigerian case

Patrick Omoruyi Eke (), B. Uzoma Achugamonu (), Simon Yunisa () and Godswill Osagie Osuma ()
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Patrick Omoruyi Eke: Covenant University
B. Uzoma Achugamonu: Covenant University
Simon Yunisa: Lagos State University
Godswill Osagie Osuma: Covenant University

DECISION: Official Journal of the Indian Institute of Management Calcutta, 2020, vol. 47, issue 3, No 2, 233-249

Abstract: Abstract This study examines the long-term effect of lending rate, exchange rate, inflation, institutional regulatory quality, budget deficit and gross domestic product on financial sector stability, proxied by the behavior of bank credit from 1981 to 2018. Using fully modified ordinary least square technique in an autoregressive distributive lag framework, non-performing loan is directly sensitive to lending rate, budget deficit, inflation rate and gross domestic product growth rate, but negatively related to exchange rate (a proxy for oil price) and institutions’ regulatory quality. The study concludes that macroeconomic risks matter in the live of bank credit, and recommends reforms to promote financial health: focus on capital and securities markets for long-tenured lending, credit market competitiveness to reduce lending rate; improved liberalization of foreign exchange market; ease of doing business and economic inclusion to improve the growth rate.

Keywords: Financial sector stability; Macroeconomic management; Oil price decline; Non-performing loans (search for similar items in EconPapers)
JEL-codes: E63 G10 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (1)

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DOI: 10.1007/s40622-020-00248-4

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