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Effect of Non-Performing Loans and Advances on Gross Domestic Product in Nigeria

Agbaeze, Clifford Chinasa Ph.D, Johnson, Adebayo Akanbi, Efanga, Udeme, Okon, Ph.D

Abstract

This study examined the effect of non-performing loans and advances on economic growth in Nigeria, using selected banking sector indicator, non-performing loans and advances. As the independent variable while real gross domestic product was used as the dependent variable. The study adopted an ex facto research design, where data were sourced from the CBN Annual Statistical Bulletin 2000–2022. The study adopted the Augmented Dickey-Fuller unit root test to test for the stationarity of the variables, multiple regression and Johansen co-integration rank test. The findings showed that non-performing loans and advances exert a negative and significant effect on real gross domestic product . The study therefore concluded that the Nigerian banking sector plays a critical role in influencing macroeconomic outcomes. Particularly, the level of non-performing loans is detrimental to economic growth, as it reflects inefficiencies in credit risk management and a fragile lending environment. The researchers’ recommended that, banks and regulators must reinforce risk assessment and loan monitoring frameworks to reduce the volume of non-performing loans.

References

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