The Determinant of Bank Lending behabiour in Nigeria

This study  investigated the  determinant of commercial banks’ lending behaviour in the Nigerian context. The study aimed to test and confirm the effectiveness of the determinants of commercial banks lending behaviour and how it affects the lending behaviour of commercial banks. The model used is estimated using Nigerian commercial banks loan advance (LOA) and other determinants or variables such as their volume of deposits (Vd), their investment portfolio (Ip), interest (lending) rate (Ir), stipulated cash reserve requirements ratio (Rr) and their liquidity ratio (Lr) for the period; 1980 – 2004.   

The model hypothesizes that loans and advances of commercial banks respond positively to changes in their volume of deposits and negatively to changes in their investments, interest rates, cash reserve ratio and their liquidity ratio. From the regression analysis of the ordinary least square (OLS) and other analysis techniques such as the coefficient of determination, coefficient of multiple regressions, the T-test statistics, the F-test statistics and the Durbin-Watson (DW) test, the model was found to be significant and its estimators turned out as expected and it was discovered that commercial banks deposits have the greatest impacts on their lending behaviour. The study then suggests that commercial bank should focus on mobilizing more deposits as this will enhance their lending services and should develop credit procedures, policies and analytical capabilities and these efforts need to be expanded into full credit  management  including origination, approval, monitoring and problem management tailored to the needs of each bank