Time Series Analysis of Sectoral Distribution of Commercial Banks’ Loans and Advances in Nigeria: An ARMA Approach

This paper model the sectoral distribution of commercial banks’ loans and advances in Nigeria using Autoregressive moving average (ARMA) and Autoregressive integrated moving average (ARIMA). The study covered the period from 2018 – 2022 (5 years) on quarterly basis. The data for the study is sourced from central bank of Nigeria (CBN) annual statistical bulletin. The study revealed that Agriculture had the highest average (3829.83 billion Naira) and Education sector had the lowest average (74.40 billion Naira) of loans and advances. Agriculture sector had the highest coefficient of variation (42.0%) while Oil and Gas had the lowest coefficient of variation (11.0%) of loans and advances. The sectors had strong positive relationship with gross domestic product (GDP). ARMA and ARIMA revealed that AR (1) past values had no significant impact on the current value of the time series data (sectors loans and advances) and MA (1) had no significant relationship with past errors. ARIMA provides the best fit for the sectors loans and advances. The Augmented Dickey-Fuller unit test showed that the sectors loans and advances are non-stationary and contain a unit root at all levels. We conclude that Government and Oil and Gas sectors loans and advances from commercial banks appreciate (positive impact) the GDP. Construction and Education sector loans and advances from commercial banks depreciates (negative impact) the GDP while Agriculture sector loans and advances from commercial banks fluctuates the GDP. The software for estimation was STATA version 14.0 and the 95% (0.05) level of significance was used for the study.