Read Online

Download PDF (EN)

Abstract

Non-performing loans (NPLs) continue to be a major problem for the Nigerian banking industry, regarding micro, small, and medium-sized businesses (MSMEs). With the goal of comprehending how these factors affect loan performance across many sectors in Nigeria, this study investigates the relationship between NPLs in the MSME sector and key macroeconomic indices. Key economic variables like interest rates, inflation, and GDP were examined using quarterly data from 2016 to 2020. Using Gaussian regression analysis, the results showed that interest rates, inflation, and non-performing loans (NPLs) were positively correlated, suggesting that higher interest and inflation rates make loan defaults worse. On the other hand, GDP and NPLs showed a negative correlation, indicating that economic expansion lowers the number of non-performing loans among MSMEs.

The study highlights the importance of macroeconomic stability in improving MSME credit performance in the light of these findings. To reduce the danger of NPLs in the MSME sector, a robust monetary policy measures that reduce inflation, interest rates, and boost economic growth are advised. The study advances knowledge of the macroeconomic factors influencing loan performance and provides useful information for stakeholders, financial institutions, and policymakers that want to support long-term MSME growth in Nigeria.