Determinants of Commercial Banks Credit to the Domestic Economy in Nigeria: Examinations of Dynamics Principles

  • Akani, Henry Waleru Department of Banking and Finance, Rivers State University, Nkpolu-Port Harcourt, Rivers State, Nigeria
  • Oparaordu, Beauty Department of Banking and Finance, Rivers State University, Nkpolu-Port Harcourt, Rivers State, Nigeria
Keywords: Determinants, Bank Credit, Domestic Economy, Macroeconomic Variables, Monetary Policy Variables and Banks Specific Variables.


This study examined determinants of commercial banks credit to the domestic economy in Nigeria. The objective was to examine the extent to which banks variables, macroeconomic and monetary policy variables affects credit allocation of Nigerian Commercial Banks. Time series data was sourced from Central Bank of Nigeria Statistical bulletin and financial statement of commercial banks. Percentage of total commercial banks loans to gross domestic product was proxy for dependent variable while the banks specific variables are peroxide by operational efficiency, liquidity, number of commercial banks branches, Commercial Banks Deposit Liabilities and deposit rate. The independent variables in macroeconomic model comprises of real gross domestic product, public expenditure, openness of the economy, inflation rate and exchange rate while monetary policy variables comprises of treasury bills rate, real interest rate, monetary policy rate, growth of money supply and financial sector development. The study employed ordinary least square properties of augmented Dickey Fuller test, co-integration test, and granger causality test and vector error correction model. Findings from the study revealed that; banks specific variables shows that deposit liabilities and liquidity ratio have positive impact on total loans and advances while deposit rate, number of commercial banks branches and openness of the economy have negative impact. Model II found that; exchange rate, inflation rate and Real Gross Domestic Product have positive impact while public expenditure and openness of the economy have negative impact on total commercial bank loans and advances. Model III found that; financial sector development and monetary policy rate have negative impact while growth of money supply, real interest rate and Treasury bills rate have positive impact on total loans and advances of commercial banks. We conclude that monetary policy, bank specific variables or internal variables and macroeconomic variables are strong determinants of Nigerian commercial banks loans and advances. We therefore, recommend for the interplay and the strengthening of macroeconomic variables, monetary policy variables and banks specific variables (internal policies) in order to enhance commercial banks credit in Nigeria.



Download data is not yet available.


Acha, G. (2011). Does bank financial intermediation causes growth in developing Economies, the Nigerian Experience. Interbond business and Management, 3 (1), 156-161.
Ahiawodzi, A. K., &Sackey, F. G. (2013).Determinants of credit rationing to the private sector in Ghana. African Journal of Business Management, 7(38), 38-64.
Akani H. W.,&Onyema, J.I. (2017).Determinants of Credit Growth in Nigeria: A Multi-Dimensional Analysis. Journal of Economics and Sustainable Development 8(20), 201-215.
Alhanusoglou, Panayiotis P., Delis, Mathaaos D. and Sikoras Christos K (2008). Determinants of bank Profitability in South Eastern European Regional –MPRA Paper no 10274 Posted 03. September.
Bagehot S. (1983). Profitability and its implication, 2nd edition, pg 44 -57 Homewood: Richard Irvin Publication.
Bbenkele, E. K. (2007). An investigation of small and medium enterprises perceptions towards services offered by commercial banks in South Africa. African journal of accounting, economics, finance and banking research, 1(1).
Behr, P., Norden, L., & Noth, F. (2013).Financial constraints of private firms and bank lending behavior. Journal of Banking and Finance, 37(9), 3472-3485.
BOFIA (1998) Requirement for Investment and Lending behaviour in Nigeria banking industry.
Buchheit, L. C. (1992). Syndicated Loans and the Art of Happiness .Int’l Fin. L. Rev., 11, 7.
Chizea G., (1994) .Analysis of Monetary and Fiscal Policies, broader perspectives, 2nd edition, pg 12-24, BBT Press.
Chodecal D, (2004).Impact of lending policy on banking industry in Nigeria. Journal, 7(4), 12-22.
Chodechai, S. (2004).Determinants of bank lending in Thailand. An empirical examination for the years 1992-1996.Unpublished Thesis.
Cole, R. A. (1998). The importance of relationships to the availability of credit. Journal of Banking & Finance, 22(6), 959-977.
Constant, F., &Ngomsi, A. (2012).Determinants of bank long-term lending behavior in the Central African Economy and Monetary Community (CEMAC).Review of Economics and Finance, 2, 107-114.
Daniel, B. C., & Jones, J. B. (2007).Financial liberalization and banking crises in emerging economies. Journal of International Economics, 72(1), 202-221
Davis and Zhu (2005). Commercial Property Price and bank Performance, 3(3), 11-23.
Demirguc-Kunt, A., Detragiache.E., &Tressel, T. (2008).Banking on the principles: Compliance with Basel Core Principles and bank soundness. Journal of Financial Intermediation, 17(4), 511-542.
Eichengreen, B., & Rose, A. K. (1998).Staying afloat when the wind shifts: External factors and emerging-market banking crises (No. w6370).National Bureau of Economic Research.
Engle R.F., & Granger, C.W.J. (1987).Co-integration and Error Correlation: Representation, Estimation and Testing Eonometrics, 55(14), 251-276.
Ezirim F (2005). Impact of bank lending on liquidity of banks in Nigeria.Journal 2(6), 44-56.
Gilbert, E., Calitz, E., & Du Plessis, S. (2009). Prudential regulation, its international background and the performance of the banks a critical review of the South African environment since 1970. South African Journal of Economic History, 24(2), 43-81.
Hansen, H. and J. Rand (2006).On the Casual Links between FDI and Growth in Developing Countries.World Development 2(9), 21-41.
Imran, K., &Nishat, M. (2013). Determinants of bank credit in Pakistan: A supplyside approach. Economic modeling, 3(5), 384-390.
Kashyap, A. K., Rajan, R., & Stein, J. C. (2002). Banks as liquidity providers: An explanation for the coexistence of lending and deposit-taking. The Journal of Finance, 57(1), 33-73
Kumbirai, M., & Webb, R. (2013).A financial ratio analysis of commercial bank performance in South Africa. African Review of Economics and Finance, 2(1), 30-53

Loutskina, E. (2011). The role of securitization in bank liquidity and funding management. Journal of Financial Economics, 100(3), 663-684.
Malede, M. (2014). Determinants of Commercial Banks’ Lending: Evidence from Ethiopian Commercial Banks. European Journal of Business and Management.2222-1905.
Matemilola, B. T., Bany-Ariffin, A. N., &Muhtar, F. E. (2015). The impact of monetary policy on bank lending rate in South Africa. Borsa Istanbul Review, 15(1), 53-59.
Meyer, L.H. (1998). The present and future roles of banks in small business finance. Journal of Banking and Finance, 22(6), 1109-1116.
Naceur, J.,& Goaid A., (2010).Determinants of commercial bank in Nigeria, 5(2),19-29, Macmillan Publication limited.
Olokoyo, F. O. (2011). Determinants of commercial banks’ lending behavior in Nigeria. International Journal of Financial Research, 2(2), 61.
Osayameh F. (1991).Lending and credit administration model for commercial banks. Nigeria Financial Review, 4(2), 55-60
Panagopoulos, Y., &Spiliotis, A. (1998). The determinants of commercial banks’ lending behavior: some evidence for Greece. Journal of Post Keynesian Economics, 20(4), 649-672.
Quintyn, M. M., & Hoelscher, M. D. S. (2003).Managing systemic banking crises(No. 224).International Monetary Fund.
Samad, A. (2004). Bahrain Commercial Bank’s Performance during 1994-2001.Credit and Financial Management Review, 10(1), 33-40.
Tomak, S. (2013). Determinants of Commercial Banks’ Lending Behavior: Evidence from Turkey. Asian Journal of Empirical Research, 3(8), 933-943
Uhomoibhi, T. (2008). Determinants of Bank profitability macroeconomics, Evidence from Nigeria, Deakin University, (Working paper).
How to Cite
Waleru, A. H., & Beauty, O. (2018). Determinants of Commercial Banks Credit to the Domestic Economy in Nigeria: Examinations of Dynamics Principles. Indian Journal of Finance and Banking, 2(2), 26-41. Retrieved from