Empirical Analysis of Non-Performing Loans Trend and Growth Rate in Nigerian Banking System

  • Aniefiok Akpan Umoren
  • Aloysius Nwosu
  • Sunday Brownson Akpan
Keywords: Non-performing loans, Banking system, Trends, Growth rates, Credit risk, Nigeria


Increasing trend in Non-performing loans (NPLs) adversely affected availability of credits to economic agents in all sectors of the economy thereby constraining financial intermediation and economic activities. The study examined the trend and growth rates of NPLs in the Nigerian banking system during the major banking policy reforms regimes namely: pre-consolidation (1979 – 2004) and post consolidation era (2005 – 2014). Time series data collected were analyzed using descriptive and regression analyses. Results indicated irregular fluctuations in NPLs’ trend in both periods. This result suggested prevalent high credit risk and corresponding reduction in lending capability of banks in the economy. Regression estimates of NPLs’ trend in the two regimes showed significant negative growth rates.This implies that, financial policies implemented in the country yielded positive impacts over time. NPLs assumed an exponential growth rate of -1.39% and -15.55% during the pre and post consolidated eras respectively. An average exponential growth rate of -5.2% was obtained during the entire period. Quadratic trend analysis revealed that, increase influence of time variable significantly reduced NPLs during pre- consolidation regime and the entire period considered. However, this influence was stagnated during post consolidation period. Based on the result, it is recommended that, prudent lending coupled with swift and orderly clean-up of banking system loan portfolios should be adopted to decelerate NPLs trend and growth rate in Nigeria. Time is an important element in designing and implementing any banking and macroeconomic policy.


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How to Cite
Umoren, A., Nwosu, A., & Akpan, S. (2016). Empirical Analysis of Non-Performing Loans Trend and Growth Rate in Nigerian Banking System. International Journal of Finance & Banking Studies (2147-4486), 5(3), 57-69. https://doi.org/10.20525/ijfbs.v5i3.260