The Relationship between Real GDP and Non-performing Loans: Evidence from Nigeria (1995 – 2009)

Abstract

As part of the continuous effort to stem the tide of bank distress in the Nigerian Banking industry, this paper examines the relationship between real GDP and Non-performing loans in Nigeria during the period 1995-2009. Based on the Pearson Product- Moment Correlation Coefficient, the time series analysis revealed that there is a significant and positive relationship between real GDP and Nonperforming loans in the Nigerian banking industry. This is contrary to the findings in previous studies. It is therefore recommended that government should implement policies that will provide the enabling environment for desired improvement in real GDP, and ensure through its regulatory agencies that due process and principles of good lending are strictly adhered to by banks and other financial institutions.