Tag Archives: Interest Rate

Analysis of Interest Rate Determination and Its Effect on Economic Growth in Nigeria (1990-2017) (Published)

The study examined the analysis of interest rate determination and its effect on economic growth in Nigeria; for the period 1990-2017. Secondary data were used and sourced from Central Bank of Nigeria Statistical Bulletin. The study employed Gross Domestic Product as proxy for Economic Growth and used as the dependent variable; whereas, prime lending rate (interest rate), inflation and private domestic investment were used as explanatory variables to measure interest rate. Hypotheses were formulated and tested using Ordinary Least Square econometrics models.  Private domestic investment had a significant effect on Gross Domestic Product in Nigeria. Inflation had an insignificant effect on Gross Domestic Product in Nigeria. Interest rate had an inverse significant effect on Gross Domestic Product in Nigeria. The coefficient of determination indicates that about 65% of the variations in economic growth can be explained by changes in commercial bank lending variables in Nigeria. The study concluded that interest rate had an insignificant effect on economic growth in Nigeria. The study recommended that Government and policy makers should focus on maintaining inflation at a low rate (single digit) and ensure that the rate is stable; this will take care of the problem of inflation on the economy. CBN should increase their surveillance on the commercial banks; in order to address the issue of arbitrarily increase of the lending rate. Government should provide healthy environment for the banks in the industry so as to render efficient financial services to the economy.

Keywords: Analysis, Determination, Economic, Growth, Interest Rate, Nigeria

Banking Sector Reforms and the Performance of Banking Business in Nigeria – An Econometric Analysis (Published)

The study examines the effect of financial reforms on banking sector efficiency in Nigeria from 1986- 2016. The objective of the study is to evaluate the extent to which exchange rate, (EXCH), interest rate (INT) and liquidity (LQT) have affected the efficiency of banking operations in Nigeria. The dependent variable in measuring banking sector efficiency is proxy by Nonperforming Loan (NPL). The OLS regression was adopted for test of the three hypotheses formulated. The findings indicate that financial reform targets have significantly affected banking sector efficiency in Nigeria in the long run. The study recommends that the regulatory and supervisory framework should be strengthened while interest rate policy should be made to stimulate savings through high real deposit rate and lending rate so as to promote financial deepening and thus banking efficiency.

Keywords: Banking Efficiency., Exchange Rate, Interest Rate, Liquidity, financial reforms

Effect of Bank Specific Factors on Bank Loan Performance in Nepal (Published)

This study examines the effect of bank specific factors on loan performance of commercial banks in Nepal. Bank size, capital, deposit, liquidity ratio and lending interest rate are taken as bank specific factors. The study has conducted correlation and regression analysis using panel data of twenty four commercial banks during the period of 1996 -2017. The empirical results show that bank size, capital and deposit have positive impact on bank lending. Hence, commercial bank willing to increase lending should increase its capital, even more than regulatory standard. Further banks willing to lend more should expand their total assets and deposit. Liquidity ratio and interest rate have negative impact on bank lending. Thus, commercial banks willing to increase bank lending, should be careful in maintaining minimum liquidity requirement and interest rate fluctuation. Central bank willing to increase bank lending to productive sector should encourage banks to decline their lending interest rate.

Keywords: Bank Lending, Capital, Deposit, Interest Rate, Liquidity Ratio, Regression, Size

Impact of Macroeconomic Variables on GDP: Evidence from Pakistan (Published)

This research examines the impact involving macroeconomic variables like inflation, real exchange rate and interest rate on GDP of Pakistan within the light involving 32 year time series data from 1980 to 2011. Research was a secondary data based, Descriptive statistics and multiple regression investigation was used to analyze the information. Econometric model used by analysis was comprised of GDP seeing that dependent variable even though the independent factors were interest rate, exchange rate and inflation rate. Data taken from intending for these variables through the website of the State Bank of Pakistan in addition to the World Bank. The individual significance of the variables, overall value and fairness of the econometric model analyzed. The study found that there’s a significant effect of inflation rate, interest rate and exchange rate of GDP. So far as the indicators of co-efficient are concerned, the inflation rate interest rate had a negative impact on GDP while exchange rate possessed positive relation to GDP. Based on the results and analysis it is suggested that the Government adopted tight monetary policy due to inflation because the results suggest that inflation provides significant effect but negative relation to GDP. In the case of developing countries like the Pakistan quality value of the exchange rate must be maintained since the results show that there’s a considerable and constructive impact involving exchange rate with GDP. Ceiling of interest rate should reduce to boost the economy.

Keywords: Gross Domestic Product, Inflation rate and Exchange rate., Interest Rate

Macroeconomic Analysis of the Relationship between Interest Rate, Economic Growth and Bank Lending in Nigeria (Published)

This study examined the relationship between interest rate, economic growth and bank lending in Nigeria. Secondary time series panel data on the study variables were sourced from Central Bank of Nigeria (CBN) Statistical Bulletin for the period 1985 – 2014. The study employed Ordinary Least Squares (OLS) technique to analyze data. The study found that interest rate had negative relationship with bank lending in Nigeria. While economic growth had positive correlation with bank lending in Nigeria. The study recommended a policy shift towards infrastructural development and an increased productive base of the notion in order to improve the financial sector performance by stabilizing the macroeconomic instruments. This it is hoped would not only help in enhancing the profitability of banks in the country but would also improve the standard of living of the Nigerian people.

Keywords: Bank Lending, Interest Rate, economic growth

ANALYSIS OF BANKS FINANCIAL PERFORMANCE IN A LIBERALIZED BANKING ENVIRONMENT: A STUDY OF FIVE SELECTED BANKS IN NIGERIA. (Published)

The very essence of this research was to assess the financial performances of banks in a liberalized banking environment using an ordinary Least Square (OLS) method of regression analysis to analyze five selected banks in Nigeria. The time series properties of the variables were investigated by conducting a unit root test to determine the stationarity status of the data using annual series data spanning from 2001 – 2010. The analysis was further extended to cointegration and error correction modeling (ECM) technique in order to test for the stationarity status of the data by conducting a unit root test using the Dickey–Fuller (DF) and Augmented Dickey–Fuller (ADF) test. The objective of this research among others is to find out the effect of the nominal lending rate, the exchange rate and the credit volume on banks financial performances in terms of their profitability. The data sources were mainly from a ten year financial summary of the banks selected and CBN Statistical Bulletin, various years. From the empirical evidence made from the study so far, it was discovered that the nominal lending rate and the total credit had a positive impact on the profit of the five selected banks under review. Only exchange rate has a negative significance which is contrary to the other variables studied. The overall submission was that the variables employed are statistically significant as over 98 percent of them were explained at the long run. The researcher, therefore, recommends that to improve banks financial performance, the banks need a good regulatory environment that will enable them to expand their scope of business but strictly within the financial service industry and also good corporate governance that will allow for transparency and minimize fraud in the bank.

Keywords: Exchange Rate, Financial Performance, Interest Rate, Liberalization, Total credit

ANALYSIS OF BANKS FINANCIAL PERFORMANCE IN A LIBERALIZED BANKING ENVIRONMENT: A STUDY OF FIVE SELECTED BANKS IN NIGERIA. (Review Completed - Accepted)

The very essence of this research was to assess the financial performances of banks in a liberalized banking environment using an ordinary Least Square (OLS) method of regression analysis to analyze five selected banks in Nigeria. The time series properties of the variables were investigated by conducting a unit root test to determine the stationarity status of the data using annual series data spanning from 2001 – 2010. The analysis was further extended to cointegration and error correction modeling (ECM) technique in order to test for the stationarity status of the data by conducting a unit root test using the Dickey–Fuller (DF) and Augmented Dickey–Fuller (ADF) test. The objective of this research among others is to find out the effect of the nominal lending rate, the exchange rate and the credit volume on banks financial performances in terms of their profitability. The data sources were mainly from a ten year financial summary of the banks selected and CBN Statistical Bulletin, various years. From the empirical evidence made from the study so far, it was discovered that the nominal lending rate and the total credit had a positive impact on the profit of the five selected banks under review. Only exchange rate has a negative significance which is contrary to the other variables studied. The overall submission was that the variables employed are statistically significant as over 98 percent of them were explained at the long run. The researcher, therefore, recommends that to improve banks financial performance, the banks need a good regulatory environment that will enable them to expand their scope of business but strictly within the financial service industry and also good corporate governance that will allow for transparency and minimize fraud in the bank.

Keywords: Exchange Rate, Financial Performance, Interest Rate, Liberalization, Total credit

THE RISING INCIDENCE OF NON -PERFORMING LOANS AND THE NEXUS OF ECONOMIC PERFORMANCE IN NIGERIA: AN INVESTIGATION (Published)

Since the introduction of Structural Adjustment Programme (SAP) in Nigeria in the 1980’s, the financial system has witnessed excessive liberalization. Community Banks which were the main stay of the financial system have transformed to Microfinance Banks (MFB) resulting from the uncontrolled collapsed of these institutions.  The Central Bank of Nigeria (CBN) very recently introduced reforms meant to curb the high incidence of bank failures in the country that required the introduction of minimum capital requirement for the establishment of commercial Banks and MFBs. After some years of experiments, it was obvious that the reforms put in place were not adequate to stem the tide of bank failures. It was as a result of this that the Apex Bank (Central Bank of Nigeria) increase the minimum capital requirement for commercial banks to N25b ($160,000).  Many Banks could not meet this new capital requirement and were faced with the option of been merged with other stronger banks or allowed themselves to be completely taken over by other banks.  From researches done on the performance of banks, it has been proven that banks tend to do very well when the economy is also doing very well. It is on this basis that this work has been undertaken to confirm this assertion or otherwise confirm that non- performing loans tend to increase when the economy slacks into a recession.  The study found that increase in non-performing loans impacted negatively on the Gross Domestic Product in Nigeria and that increase in lending  rate and inflation rate cause non-performing loans to increase. The implication of this study is that Central bank should introduce policies that can have moderating effects on inflation and lending rates.Government should pay their loans on time and insider abuse should be eliminated from the financial system. Above all, banks should know their customers before granting loans to them, infact adhering strictly to the 5C’s of credit in modern banking practice.

Keywords: Collateral, Economy, Inflation Rate, Interest Rate, Non-Performing Loans, Reforms/Government Policies

DOES INFLATION WEAKEN ECONOMIC GROWTH? EVIDENCE FROM NIGERIA (Published)

The study aims at evaluating the link between inflationary rate and economic growth in Nigeria. It also examines the nature and form of association between inflationary rate and exchange rate as well as interest rates from 1979 t0 2010.Ordinary least squares approach in the form of multiple regression was adopted in examining the relationship among the variables while the causalities were evaluated using Granger Causality model. It is pertinent to check whether the short run relationships would be sustained in the long run. To achieve this, Johansen and Juselius cointegration technique was adopted while the variables were adjusted for stationarity using the Augmented Dickey- Fuller (ADF) tests for unit root. It was found that inflationary rate is negatively related with real gross domestic product while exchange rates and interest rates are positively related with inflationary rate though not to a very significant extent. This is sustainable even in the long run and the implication is that when inflationary rate is rising, it affects the economy negatively as growth is dampened. On causality, at both lag 2 and lag 4, the study reveals that there is no causality between inflationary rate and real gross domestic product. However, at lag 2, there is a unidirectional causality running from inflationary rate to interest rate and also a unidirectional causality running from interest rate to real gross domestic product. At lag 4, there is a unidirectional causality running from interest rate to inflationary rate and from interest rate to exchange rate and also a unidirectional causality running from exchange rate to real gross domestic product. Consequently, efforts should be geared towards keeping inflationary rate at a single digit level to enhance the growth and development of Nigeria economy and to ensure that macroeconomic activities are kept alive

Keywords: Cointegration, Exchange Rate, GDP, Granger, Inflation Rate, Interest Rate

Richard Cantillon’s Ideologies and its Implications for Economic Development in Nigeria (Published)

This paper examines and ascertains how the contributions of Richard Cantillon have been relevant to the development of the Nigerian economy. In doing this, the economic thoughts of Richard Cantillon were critically examined in order to see how these issues raised have been affecting the Nigerian economy. Political economy and descriptive approaches were used to x-ray the relevance of Richard Cantillon’s contributions to Nigeria’s development. His contributions among others include: the nature of wealth, social and economic organization of people, wages of labour, theory of values, population problems and the use of gold and silver, barter, prices, circulation of money, interest, foreign trade, foreign exchange and banking and credit. The findings of the study revealed that these contributions are of great relevance to economic development in generally, but have not specifically contributed to the development of Nigerian economy. This is seen in the areas of low per capita income, negative attitude to work, inevitable population problems, persistent increase in prices, high lending interest rate, unfavourable terms of trade, incessant and diversion of public funds into private business rather than the real economy, and without doubt Nigeria has no place in foreign trade. Based on the foregoing, it was concluded that all these ugly trends accounted for the reason why economic development is not at sight in Nigeria. Thus, it was recommended that the monetary authorities should initiate sound monetary policies. Also, these monetary policies should be complemented with effective fiscal policies in order to put the Nigerian economy back to path of economic growth and development.

Keywords: Economic Development, Exchange Rate, Fiscal Policies, Foreign Trade, Interest Rate, Monetary Policies, Money Supply, Wages of Labour