Interest Rate Spread And The Efficacy Of Commercial Banks’ Lending In Nigeria

Authors

  • Efanga, Udeme Okon, Ihemeje, J. C., Okafor, M. C., Zwingina Christy Twaliwi, Adeleke, Ezekiel Olukayode, Kingsley Nwagu

Abstract

The main objective of this study is to analyze the impact of interest rate spread on the efficacy of
commercial banks’ lending in Nigeria. Data were obtained from secondary sources; Central Bank of Nigeria
Statistical bulletin of 2018 and International Monetary Fund, International Financial Statistics and data files.
Pre- estimation test (unit root test) was carried out on the data and the result showed that the variables were
integration of 1(0) and 1(1), the Autoregressive Distributed Lag (ARDL) Model was employed for data
estimation. Several diagnostic tests such as auto-correlation test, Ramsey stability test, serial correlation test and
test for heteroscedasticity were also carried out and they all confirmed the goodness of fit and validity of the
model employed. Findings reveal that: interest rate spread impacted positively and significantly on commercial
banks’ loans and advances in Nigeria. The study therefore concludes that interest rate spread impacted
commercial banks’ loans and advances in Nigeria positively across the period covered by this study. The study
recommend that commercial banks in Nigeria should maintain their current interest rate spread strategy, since it
is working well for them and helping them realize a high demand for their loans and advances in Nigeria.

Published

2020-06-30

Issue

Section

Articles