The Implications of Non Performing Loans on Nigerian Economic Growth (1992-2009).

Abstract

Traditionally, the ability of the financial subsector to play its role in reducing non-performing loan has been periodically punctuated by its vulnerability to systemic distress and macroeconomic volatility, and policy fine turning inevitability. The purpose of this project was to ascertain the implication of non-performing loan on economic growth in Nigeria. This study adopts quantitative technique in generating data and OLS in its analysis. A stationary test was carried out using the Augmented Dickey-Fulker test (ADF) and stationary test found at first difference at 1% and 5% level of significance. The Johansen-guselius co-integration technique employed in this study proved to be superior in assessing the co-integrating properties of variables. The result of the test indicates if co integration equations at 5 percent level of significance. The study finds that there is a long run relationship between non-performing loan and economic growth in Nigeria and there is significant relationship between inflation rate and non-performing loans. We conclude that non-performing loan can induce or retard in order to minimize the effort non-performing loan o the economy as a whole and also avoids the encroachment of the factors responsible for non-performing loan into the banking system, the regulatory authorities may have to use better measures of evaluating the features of non-performing loan at an early stage. This will no doubt create sufficient lead-time to apply remediable solution before serious damage is done.