Impact of Credit Bureau Development on Loan Default Rates in Nigerian Commercial Banks: An Empirical Study

Credit bureaux reduce information asymmetry between lenders and borrowers, and their development in Nigeria following the Credit Reporting Act 2017 should theoretically reduce loan default rates, but empirical evidence of this relationship is limited. This study empirically examines the impact of credit bureau development on loan default rates in Nigerian commercial banks for the period 2012 to 2022. Secondary data were sourced from the Central Bank of Nigeria's credit bureau licensing and supervision reports, the World Bank Doing Business Index credit information depth scores, and the audited financial statements of twelve commercial banks. Loan default rate was measured by the non-performing loan ratio. Credit bureau development was measured by credit bureau coverage percentage and credit information depth score. Panel data regression with fixed effects and the generalised method of moments estimator were employed. Results showed a significant negative relationship between credit bureau coverage and non-performing loan ratios (coefficient = -0.39, p < 0.01), indicating that broader credit information sharing reduces defaults. A one-unit increase in the credit information depth score was associated with a 0.82 percentage point reduction in the non-performing loan ratio. The effect was strongest for unsecured retail loans, where credit bureau data had the highest marginal value. The study fills an empirical gap by quantifying the credit bureau-default relationship in the Nigerian context, and recommends mandatory reporting of all credit facilities above 100,000 Naira to licensed credit bureaux. Keywords: credit bureau, loan default rates, non-performing loans, information asymmetry, Nigerian commercial banks