Assessment Of The Effect Of Loan Administration On Profitability In The Nigerian Banking Sector (Case Study Of Commercial Banks)
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Abstract
The aim of this research work is to assess the effect of loan administration on profitability in the Nigerian banking sector using commercial banks as a case study within the period of 1999 to 2018. An in-depth analysis of the works of others scholar was reviewed. The research work adopted the famous Ordinary Least Squares (OLS) regression analysis for data analysis and test of hypotheses. Findings revealed that loans and advances (LAD) of banks to the private sector has a positive and significant, relationship with bank profitability as revealed by its positive coefficient of 0.150 with a corresponding significant value of 0.032, this is in line with our a priori expectation. It was also found that total deposits of deposit money banks (TDDMBs) have a positive relationship with bank profitability (0.397); the relationship is statistically significant as revealed by the probability value 0.000. Finally, the study found that interest rate has a positive and significant, relationship with bank profitability. The research work recommends that there is urgent need for institutions in Nigerian banking sector especially commercial banks to intensify their capacity in loan administration while the regulatory authority should monitor the activities of these institutions in this regard to ensure compliance with regulatory guidelines; that Banks must put in place sound credit-granting process, strictly hold fast to know your customer (KYC) system, applying effective measures in measuring and monitoring of credit and ensure effective controls over credit risk; that institutions in the Nigerian banking sector should ensure that only trained and experience loan/credit officers are in-charge of administration of loans to the general public; and that the Central Bank of Nigeria should as a matter of necessity through her Monetary Policy Committee, review the anchor borrowing rate, that is the monetary policy rate from lime to time to reflect changing peculiarities of the Nigerian financial sector.