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Macroeconomic risks and financial sector stability: the Nigerian case

Author

Listed:
  • Patrick Omoruyi Eke

    (Covenant University
    Lagos State University)

  • B. Uzoma Achugamonu

    (Covenant University)

  • Simon Yunisa

    (Lagos State University)

  • Godswill Osagie Osuma

    (Covenant University)

Abstract

This study examines the long-term effect of lending rate, exchange rate, inflation, institutional regulatory quality, budget deficit and gross domestic product on financial sector stability, proxied by the behavior of bank credit from 1981 to 2018. Using fully modified ordinary least square technique in an autoregressive distributive lag framework, non-performing loan is directly sensitive to lending rate, budget deficit, inflation rate and gross domestic product growth rate, but negatively related to exchange rate (a proxy for oil price) and institutions’ regulatory quality. The study concludes that macroeconomic risks matter in the live of bank credit, and recommends reforms to promote financial health: focus on capital and securities markets for long-tenured lending, credit market competitiveness to reduce lending rate; improved liberalization of foreign exchange market; ease of doing business and economic inclusion to improve the growth rate.

Suggested Citation

  • Patrick Omoruyi Eke & B. Uzoma Achugamonu & Simon Yunisa & Godswill Osagie Osuma, 2020. "Macroeconomic risks and financial sector stability: the Nigerian case," DECISION: Official Journal of the Indian Institute of Management Calcutta, Springer;Indian Institute of Management Calcutta, vol. 47(3), pages 233-249, September.
    • Handle: RePEc:spr:decisn:v:47:y:2020:i:3:d:10.1007_s40622-020-00248-4
    DOI: 10.1007/s40622-020-00248-4
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    More about this item

    Keywords

    Financial sector stability; Macroeconomic management; Oil price decline; Non-performing loans;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy

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