INVESTIGATING THE REAL TRIGGERS OF LOAN DEFAULT IN NIGERIA

CLEMENT ADEWOLE, CHRISTOPHER OTUBOR, MANG NIRI, AKINTUNDE AYENI, INNOCENT KAIRO, AUGUSTINE OKEKE

Abstract


Loan defaults come with dire consequences for banks, the economy and the
defaulting customers. In Nigeria, banks loan portfolio hit =N13tr in April
2015. Out of this amount, over =N546.02b was classified as non-performing
debts in March 2015. This study sought to order environmental factors
responsible for loan default; determine prevalence of loan default in sectors
and recommend loan management strategies. In a survey of 120 bank
borrowing customers cutting across 13 sectors of the economy, the study
applied logistic regression to determine the significance of each of 10
identified environmental factors responsible for loan default, resulting in an
order of significance of loan default factors. Also applying the list of loan
defaulters released by Central Bank of Nigeria in 2015, the study analysed
the list according to sectors covering banks which account for about 50% of
loans to the economy, and determined the prevalence of loan default as a
ratio of loan default to total loans advanced to each sector. It is
recommended that Banks should be more critical of the Service sector with
the highest loan loss prevalence in their lending decisions.

Keywords


Loan, Default, Factors, Prevalence

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International Journal of Management Science Research ISSN ISSN 2536 – 605X(Print)

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