DETERMINANTS OF LENDING BEHAVIOUR OF QUOTED DEPOSIT MONEY BANKS IN NIGERIA

Granting loans and advance for the borrower is the main activity that generates income for banks highly. Therefore, loan portfolio is typically the largest asset and source of revenue for banks. This study examines the determinants of lending behavior of quoted DMBs in Nigeria. The study employs descriptive and causal research designs using panel data of ten years (2009-2018) to examine the effect of independent variables (volume of deposits, bank size, nonperforming loans, lending interest rate) on the dependent variable (loans and advances). The population of the study is the 15 quoted Deposit Money Banks (DMBs) in Nigeria as at December, 2015. Then, a non- probability method in form of judgmental/purposive sampling technique was employed. The study utilizes secondary data from banks ’ annual reports, CBN Bulletin and the Nigeria Stock Exchange Market Fact Book. Panel regression was used and it was found that, nonperforming loans is negatively related to lending growth. It is also found that, lending interest rate has negative but insignificant effect on lending behavior. Furthermore, a significant positive effect of firm size on bank lending was found. Finally, the study found insignificant positive effect of customers ’ deposits on lending growth. Based on the findings of the study, the study recommends among others that, stringent control mechanism should be put in place to reduce the extent of nonperforming loans in banks.