Abstract This paper investigated the impact of macroeconomic variables and idiosyncratic factors on non-performing loans (NPLs) of listed deposit money banks (DMBs) in Nigeria. The study employed secondary data from the Central Bank of Nigeria statistical bulletin, World Development Indicator and financial reports of listed deposit money banks (DMBs) in Nigeria. By using data from 1993-2023, this study examined the impact of macroeconomic variables on NPLs. The study also considered panel data spanning from 2013 to 2023 to assess the impact of idiosyncratic factors on NPLs. The study employed Auto Regressive Distributed Lag, static panel data analysis and granger causality test. The findings revealed that domestic debt and crude oil prices exert a negative but significant effect on NPLs. Meanwhile, the exchange rate influences NPLs negatively in the short run while a significant and positive effect was noticed in the long run. In the short run, the lending rate was found not significant while a positive and significant relationship was established in the long run. The study concluded that macroeconomic variables and idiosyncratic factors are necessary tools that can be used in explaining variation in NPLs and reducing the level of NPLs in an economy. Therefore, this study recommends that the government should ensure stability in the exchange rate and avoid volatility in exchange rate value as deterioration in the exchange rate indicates a devastating effect on the level of NPLs.
Kolawole et al. (Sat,) studied this question.