IIARD International Institute of Academic Research and Development

Journal of Accounting and Financial Management (JAFM )

E-ISSN 2504-8856
P-ISSN 2695-2211
VOL. 10 NO. 10 2024
DOI: 10.56201/jafm.v10.no10.2024.pg189.206

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Macroeconomic Variables and Loan Portfolio Quality: Moderating Role of Capital Adequacy for Sustainable Development of Listed Banks in Nigeria

Yusuf Ova Mutalib PhD, Chijioke Emmanuel Odumegwu ACA, Daniel Ehi Eikhomun CPA, Johnson Ayanwuyi FCA and Iriabije Emmanuel Uareme CPA

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Abstract

The study examined the moderating role of capital adequacy on the relationship between macroeconomic variables on loan portfolio quality among listed deposit money banks in Nigeria. The study period covered the period of 10 years from 2014-2023 using secondary data (Annual audited reports) of listed banks in Nigeria. The study used census sample of 12 banks listed in Nigeria. The study used descriptive research design to determine the effect of the independent variables to the dependent variable as well as the moderating effect. The independent variable of exchange rate, inflation and gross domestic product were regressed on loan portfolio quality. The data analysis includes descriptive and inferential statistical analysis by employing regression analysis. Panel regression analysis was adopted to estimate the regression equation. Findings from the study revealed that the exchange rate, Gross domestic product and capital adequacy has significant positive and significant effect on loan portfolio quality, conversely inflation rate has positive but no significant relationship with loan portfolio quality among listed Banks in Nigeria. Furthermore, capital adequacy has moderating effect on the relation between exchange rate and loan portfolio quality, capital adequacy has moderating effect on the relationship between inflation rate and loan portfolio quality. On the other hand, capital adequacy has positive but no moderating effect on the relationship between gross domestic product and loan portfolio quality among listed Banks in Nigeria. The study recommends amongst other things to Central Bank of Nigeria on fiscal and monetary policies which could aim at controlling hyper-inflation and growing a robust economy that will support the intermediation functions of deposit money banks without jeopardizing the loan portfolio quality of banks.

keywords:

Capital Adequacy, Exchange rate, Inflation rate, Gross Domestic Product and Loan

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