DETERMINANTS OF DEPOSIT MONEY BANKS’ LOANS AND ADVANCES IN NIGERIA

David Benjamin Uyagu, Godwin Onyewuchi Osuagwu

Abstract


The low availability of Loans and Advances from deposit money banks in Nigeria to individuals and firms has been a long standing issue. Consequently, this study investigated the determinants of Loans and Advances in Nigeria focusing attention on liquidity ratio, Interest rate, rate of inflation, loan deposit ratio and cash reserve ratio. Data from deposit money banks in Nigeria showing performance indices was obtained through secondary sources of the Central Bank of Nigeria (CBN) Statistical Bulletin over the period 1994-2013. The data was analysed using Ordinary Least Square Regression Technique and the findings revealed that Liquidity ratio, rate of inflation, Loan deposit ratio and Cash reserve ratio had negative statistical significance with loans and advances while Interest rate had negative statistical insignificance with loans and advances. It was recommended amongst others that government should put in place a policy that will reduce liquidity ratio, Interest rate, rate of inflation, and cash reserve ratio while loan deposit ratio should be increased to boost the economy. 

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