INTEREST RATES AND LOAN REPAYMENT PERFORMANCE IN DEPOSIT MONEY BANKS IN NIGERIA
Jeffrey Ogie Eguavoen 1
Amenze Sandra Airhiavbere 2
Department of Finance, Faculty of Management Sciences, University of Benin, Nigeria 1&2
Corresponding Email: jeffreyogie@uniben.edu 1
Abstract
The study investigated the relationship between interest rates and loan repayment performance in deposit money banks (DMBs) in Nigeria from 2004 to 2023. The specific objectives were to find out whether interest rate (INTR), inflation rate (INFLR), loan duration (LDUR) and gross domestic products (GDP) significantly affected loan repayment performance (LRP) in DMBs in Nigeria overtime. The fully modified least squares (FMOLS) technique was utilised for data analysis and the results obtained revealed that, interest rate (INTR) and loan duration (LDUR) exert a weak positive relationship with loan repayment performance (LRP) of DMBs in Nigeria while inflation rate (INFLR) and gross domestic products (GDP) have a significant negative effect on loan repayment performance in DMBs in Nigeria. The study recommends among others that, the significant negative impact of inflation rate on loan repayment performance in DMBs suggests that monetary authority (CBN) should up their regulatory and monetary oversight in the management of inflation rate in the country. They must ensure that the right policy that will minimize the continuous rise in general price level. Inflation targeting measure should be proactively deployed to stabilize inflation level in the country as this will enable customers and indeed borrowers to be able repay any amount of money borrowed to do business from DMBs in Nigeria.
Keywords: Loan Repayment, Interest Rate, Inflation, Gross Domestic Product, Loan Duration
JEL Classification: E31, E43, E58, G21.
