The Impact of Macroeconomic Dynamic on Bank Lending Behavior in Nigeria

Iwedi Marshal
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Iwedi Marshal: Department of Banking & Finance, Rivers State University, Nkpolu-Oroworukwo Port Harcourt, Nigeria

Noble International Journal of Economics and Financial Research, 2017, vol. 2, issue 10, 131-139

Abstract: This study investigated the impact of macroeconomic dynamics on bank lending behavior in Nigeria between 1976 to 2016 using ordinary least square equation estimation, Johansen multivariate co integration and granger causality techniques. The findings of this study leads to various conclusive remarks. The result of the cointegration shows a long run equilibrium impact between macroeconomic variables and bank lending behavior in Nigeria. The OLS result reveals that bank capitalization ratio is the most important bank internal variables that explain their lending behavior given the vagaries of the macroeconomic environment in Nigeria while the money supply was found to be the most important macroeconomic variable that explains bank lending behavior in Nigeria. These variables (MOS & CAP) were found to be positive and significant at 5% level. Additionally, it was found that dynamics associated with monetary and macroeconomic variables (EXR, GDP, INF, MPR & LIQ) have a negative impact on bank lending behavior in the short run. The result of causality shows a unidirectional causality flowing from CPS to GDP, CPS to MPR and CPS to CAP in all cases excerpt for EXR to CPS. There is also evidence of bi-directional causality between CAP & EXR, CAP & GDP, LIQ & MPR and CAP & LIQ. From the findings of this study and the conclusion derived there from, we recommend that macroeconomic policy makers should adopt policy measures geared toward controlling the rising trend of inflation, exchange rate, and interest rate in Nigeria. While frantic effort should be made by the manager of the economy toward restoring the Nigeria economy to the path of sustainable and inclusive growth with the view of aborting the harmful effect of loan curtailment on investment and economic growth in the long-run.

Keywords: Macroeconomic Dynamic; Bank Lending; Behavior; OLS; Co integration; Pairwise Granger Causality (search for similar items in EconPapers)
Date: 2017
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