Banking system stability: A prerequisite for financing the Sustainable Development Goals in Nigeria
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LLC “Consulting Publishing Company “Business Perspectives”
Abstract
Description
The banking system, which has been the fulcrum of funding for Nigeria’s economy, is
plagued by instability in the face of a growing amount of non-performing loans. This is
examined in the current milieu of the need for funding the Sustainable Development
Goals (SDGs). Using a number of proxies for SDGs 8 and 9, annual time series data
covering 1992 to 2019 were used with variables such as GDP per capita, commercial
banks’ loans to small-scale enterprises, banking system stability indicators and liquid
assets to total assets of banks. The study utilized the Autoregressive Distributed Lag.
Findings showed that banking system stability has a significant positive effect on funding
the SDGs 8 and 9 beyond the five per cent level of significance within the study
period. Non-performing loans remained negative throughout the study. The result
suggests that banking stability would enhance funding of the SDGs, and banks would
be stable if they finance the SDGs. The policy implication explains the importance of
banks actively pursuing opportunities to build sustainable enterprises and developing
strategies that will enable their core banking business to be more venture-driven
rather than consumer-oriented. In conclusion, there is a need to completely eliminate
or reduce the quantum of non-performing loans from the system and establish a regulatory
framework that will facilitate its expected role of intermediation in the economy
profitably and successfully.
Keywords
HB Economic Theory, HG Finance