Interest Rate Spread and the Efficacy of Commercial Banks’ Loans and Advances in Nigeria

Udeme Efanga, J. C Ihemeje, Yamta H. A and Biradawa Kayadi

Journal of Accounting and Finance in Emerging Economies, 2020, vol. 6, issue 3, 753-763

Abstract: Abstract: The main objective of this study is to analyze the impact of interest rate spread on the efficacy of commercial banks’ lending in Nigeria. Data were obtained from secondary sources; Central Bank of Nigeria Statistical bulletin of 2018 and International Monetary Fund, International Financial Statistics and data files. Unit root test on the time series data displayed a combination of 1(0) and 1(1) variables, the Autoregressive Distributed Lag (ARDL) Model was employed for data estimation. Several diagnostic tests such as auto-correlation test, Ramsey stability test, serial correlation test and test for heteroscedasticity were also carried out and they all confirmed the goodness of fit and validity of the model employed. Findings reveal that: interest rate spread impacted positively and significantly on commercial banks’ loans and advances in Nigeria. The study therefore concludes that interest rate spread impacted commercial banks’ loans and advances in Nigeria positively across the period covered by this study. The study recommend that commercial banks in Nigeria should maintain their current interest rate spread strategy, since it is working well for them and helping them realize a high demand for their loans and advances in Nigeria.

Keywords: Keywords: interest rate spread; commercial banks’ loans and advances; liquidity ratio; monetary policy rate; inflation rate and exchange rate (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:src:jafeec:v:6:y:2020:i:3:p:753-763

DOI: 10.26710/jafee.v6i3.1179

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