Optimality in Nigerian Deposit Money Banks Loan Portfolio: Evidence from First Bank Nigeria Holdings Plc

Proceedings of The 5th International Conference on Business, Management and Economics

Year: 2021

DOI:

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Optimality in Nigerian Deposit Money Banks Loan Portfolio: Evidence from First Bank Nigeria Holdings Plc

Dare, F. D. (Ph.D.)

ABSTRACT: 

This study is concerned with the determination of optimal loan portfolio of deposit money banks in Nigeria. Specifically, the research is a case study of how optimal loan portfolio could have been achieved by First Bank Nigeria Holdings PLC (FBNH) for the year 2019. Data in respect of the bank’s loan portfolio, interest rates and deposits were collected from the annual financial statements and accounts and analysed using linear programming modelling (LP). The resulting models were analysed using LINGO; an optimization software. The results of the analysis in this study show that FBNH (PLC) would have achieved optimal results if it had granted loans and advances as overdrafts and terms in the corporate loan class and overdraft in the retail loan class. This study therefore recommends that FBNH (PLC) strategically manage these loan types and classes in the face of Central Bank’s statutory requirements to achieve maximum returns.

Keywords: Corporate Loan; Liquidity; Linear Programming; Optimization; Retail Loan.