American Journal of Economics, Finance and Management
Articles Information
American Journal of Economics, Finance and Management, Vol.1, No.3, Jun. 2015, Pub. Date: May 11, 2015
Lending Rate, Bad Debt and Credit Management in Nigeria Commercial Banks: A VAR Analysis
Pages: 164-170 Views: 3335 Downloads: 1693
Authors
[01] Agu Osmond Chigozie, Department of Economics and Development Studies, Federal University, Oye-Ekiti, Ekiti State Nigeria.
[02] Ogbuagu Matthew Ikechukwu, Department of Economics and Development Studies, Federal University, Oye-Ekiti, Ekiti State Nigeria.
Abstract
This paper examines the causes of bad and doubtful debt in Nigeria commercial banks. It presents a framework to x-ray the risk and to validate the checks and balances to prevent or rather reduce the risk. The study uses both primary and secondary tools for data collection to determine causes of bad debts. Analysis of Variance (ANOVA) and Vector Autoregressive (VAR) model were applied to validate the result spanning the period 1993(Quarter 1) to 2011(Quarter 4). The Impulse response shows that incessant increase in interest rate is a strong and statistically important factor that causes bad debt in Nigeria commercial banks. Bank`s Management should establish sound lending policies, adequate credit administration procedure, effective and efficient machinery to monitor lending function with established guidelines, reduce interest rates on lending etc.
Keywords
Bad Debt, Lending Rate, Credit Management, VAR, Nigeria
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