INTEREST RATES AND LOAN PERFORMANCE OF DEPOSIT MONEY BANKS IN NIGERIA

INTEREST RATES AND LOAN PERFORMANCE OF DEPOSIT MONEY BANKS IN NIGERIA

Author by Dr. Samuel Olaoye

Journal/Publisher: Epra International Journal Ofeconomic And Business Review

Volume/Edition: 8

Language: English

Pages: 13 - 20

Abstract

There has been much speculation about the seemingly high lending rates as evident of perceived inequity on the part of
bankers by their customers in reaction to huge overhang of unpaid loans in the books of Deposit Money Banks (DMBs).
Data for the study was collected from the financial statements of the three banks under study (UBA, FBN and GTB), as well
as the CBN’s statistical database for macroeconomic variables analysed using Microsoft Excel’s regression function to
perform a descriptive, correlation and regression analysis and examine the relationship between interest rates and loan
repayment. This study established that there is a significant relationship between the interest rate and loan repayment,
measured by credit quality using the non-performing loan ratio. This indicates that an increase in the interest rate will
likely cause a corresponding increase or decrease in the credit quality. It further showed that any slight change in the
lending rate would increase non-performing loan.


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