The Influence of Deposits on Loans Granted By Selected Banks in Nigeria
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Date
2009
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Abstract
Financial intermediation is one of the primary functions of (commercial) banks and one of the beneficiaries of this function in Nigeria is the manufacturing sub-sector of the economy. But things appear not rosy for this sector of recent and the banks are being blamed for it. Manufacturers complain of lack of inadequate loan facilities from banks to expand their production capacity, Blanks on their own appear helpless as the situation is blamed on deposits received from the surplus unit. Why is this so? How do bank deposits affect loans granted by Nigerian banks? The maturity profiles of bank loans and deposits were arranged along the following lines-under 1 month, 1-3 months, 3-6months, 6-12 months and over 12 months. Using Doubly Multivariate Repeated Measures Design on the maturity profiles of loans and deposits of seven Nigerian banks from 2000-2007, it was found that there is a significant difference in the maturity profiles of the two variables in all the banks examined over the period under review and no significant difference in their linear combinations, What this means in effect is that since: the bulk of bank deposits are of short term duration, manufacturing companies have to look beyond the banking sector to source for their much needed long term loans