A Dynamic Analysis of The Relationship Between Monetary Policies and Loan Risk Exposures in Nigerian Deposit Money Banks
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MCSER Publishing, Rome-Italy
Abstract
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This work investigated the effects Monetary Policy has on Loan Risk Exposure in Nigeria Commercial Banks. Nigerian banks
do not believe much in giving out loans and advances to much of the countries manufacturing and agro based businesses
because of the perceived risk associated with lending to these businesses. This has prevented funds from getting to
businesses that can help grow the economy. The data analysis of this study was carried out with ordinary least square
multivariate regression perspective within the confinement of a vector error correction model (VECM) framework. The result of
this study reveals that lending rate does not play significant role in support of loans and advances. However, monetary policy
rate reveal the most significant effect on commercial banks loans and advance confirmed by its efficient estimate. This means
that monetary policy rate is a competent parameter in measuring the performance of banks in the allocation of their credit
facilities. Based on the findings, it is suggested that the monetary authorities give opportunity for the full interplay of the market
forces of supply and demand in the allocation of credit .This interplay should be closely monitored to prevent banks from
creating artificial scarcity of funds in order to hike their lending rate.
Keywords
H Social Sciences (General), HG Finance