The Impact of Non-performing Loans on Nigerian Economic Growth, 2011-2020

Adetayo  Victor Osunnaiye; Nargiza  Alymkulova

doi:10.31039/ljss.2022.3.72

Authors

Adetayo Victor Osunnaiye Department of Economics, Nile University of Nigeria
Nargiza Alymkulova Nile University of Nigeria, Abuja, Nigeria

DOI:

https://doi.org/10.31039/ljss.2022.3.72

Keywords:

Non-performing loan, economic growth, bank’s credit to the private sector, money supply, government expenditure

Abstract

This paper examined the impact of rising non-performing loans (NPL) on Nigeria's economic growth using time series data from 2011 – to 2020. In analyzing this relationship, the co-integrated autoregressive distributed lag (ARDL) model was employed, and the study revealed a long-run negative relationship between NPL and economic growth. This suggests that a higher NPL may have reduced the banks' loan disbursement capacity or made the banks reluctant to give out more loans to the productive sector, adversely affecting the economy. This research also supports the long-standing results of a positive relationship between money supply and economic growth. It further revealed a positive relationship between government expenditure and economic growth in Nigeria. Therefore, the study recommended that Nigeria's financial management team activities include a dedicated watch on the rising NPL in the banking industry. Furthermore, monitoring NPL should no longer be viewed as the sole responsibility of the CBN but that of all managers of the Nigerian economy.

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