Monetary Policy and Bank Lending in Nigeria

Abstract

In the last few decades, the high level of fluctuation on the macroeconomic variables rate in Nigeria has disrupted the well-functioning of the financial system which invariably slows the pace of economic activities in the country. Hence, this informed the need to examine the impact of monetary variables on bank lending in Nigeria. The study made use of macroeconomic time series variables between 1980-2018. The data obtained were subjected to Autoregressive Distributed Lag (ARDL) of Ordinary Least Square econometric technique as the estimation method of analysis. The findings of the study revealed inflation rate and interest rate have a significant negative effect on loans and advances; the exchange rate has a positive significant effect on loans and advances while liquidity ratio and money supply have a negative insignificant effect on loans and advances. More so, the Granger Causality test further revealed that the inflation rate does cause the lending rate in Nigeria while the interest rate doesn't cause the inflation rate in Nigeria. Inflation rate, interest rate and exchange rate are the major significant determinants of commercial bank loans and advances in Nigeria