www.sciedu.ca/ijfr International Journal of Financial Research Vol. 2, No. 2; July 2011
Published by Sciedu Press 61
Determinants of Commercial Banks’ Lending Behavior in Nigeria
Felicia Omowunmi Olokoyo
Department of Finance, School of Business, College of Development Studies, Covenant University
Ota, Ogun State, Nigeria
Tel: +234-802-394-8641 Email: felicitymy79@gmail.com
Received: January 20, 2011 Accepted: March 30, 2011 doi:10.5430/ijfr.v2n2p61
Abstract
This study investigated the determinants of commercial banks’ lending behaviour in the Nigerian context. The study aimed to test and confirm the effectiveness of the common determinants of commercial banks lending behaviour and how it affects the lending behaviour of commercial banks in Nigeria. 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 – 2005. The model hypothesizes that there is functional relationship between the dependent variable and the specified independent variables. From the regression analysis, 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 banks should focus on mobilizing more deposits as this will enhance their lending performance and should formulate critical, realistic and comprehensive strategic and financial plans.
Keywords: Lending, Deposits, Investment, Portfolio, Liquidity, Solvency, Interest rate.
1. Introduction
Lending which may be on short, medium or long-term basis is one of the services that commercial banks do render to