Original Research Article | OPEN ACCESS
Non-Performing Loans (NPL) and Loans and Advances of Commercial Banks in Nigeria

Mustafa ISEDU1 , Osaruyi Jeffrey ERHABOR2

1,2Department of Banking and Finance, Faculty of Management Sciences, Ambrose Alli University, Ekpoma.

For correspondence:-  Mustafa ISEDU   Email: isedumus@yahoo.com

Received: March 19, 2020        Accepted: March 31, 2020        Published: March 31, 2020

Citation: ISEDU M, ERHABOR OJ. Non-Performing Loans (NPL) and Loans and Advances of Commercial Banks in Nigeria. Account Tax Rev 2020; 4(1):104-117 doi:

© 2020 The authors.
This is an Open Access article that uses a funding model which does not charge readers or their institutions for access and distributed under the terms of the Creative Commons Attribution License (http://creativecommons.org/licenses/by/4.0) and the Budapest Open Access Initiative (http://www.budapestopenaccessinitiative.org/read), which permit unrestricted use, distribution, and reproduction in any medium, provided the original work is properly credited..


The main aim of this paper is to examine the impact of Non-Performing Loans (NPLs) on banks’ loan and advance in Nigeria. Data were collected while the econometric statistical technique was used for preceding the co-integration analysis, we carried out unit root test using the Phillip – Peron approach, to determine the stationary of the data. From the analysis, the variable Non-performing loans (NPL) is positively signed, indicating that there is a direct relationship between Non-performing loans and banks’ loan and advances. The variable capital adequacy and bank loan and advances are positively signed, indicating that there is a direct relationship between bank loan and capital adequacy. The coefficient of the variable capital adequacy is statistically significant. The result shows that the Gross Domestic Product has a positive sign which, implies that the relationship between banks’ loan advances and Gross Domestic Product is positive and statistically significant. The variable Interest Rate has a negative sign which, means that the relationship between Interest Rate and Bank Loan and Advances is inverse, and it is statistically significant.From the result, the variable inflation rate and Bank Loan and Advances are negatively related. The result further shows that total deposit is positive, but has an insignificant statistical effect on bank loan and advances of commercial banks. The paper, therefore, recommended that there is a need for government to promulgate appropriate financial policies that will have a positive impact on non-performing loans, and consequently improve the financial sector. The paper also suggested that the Central Bank should fashion more effective oversight measures to address weak corporate governance, poor risk management and fraud that in the past played a significant role in non-performing loans and bank failures in Nigeria and other returns.

Keywords: Non-Performing Loans, Banks’ loan advances, Unit roots, Cointegration

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