ABSTRACT

 This study titled "Interest rate spread and loan divers signification among Nigeria 's commercial banks (case study offirst bank of Nigeria and union bank plc)" is aimed at achieving the following objectives; Examining the interest rate spread and loan diversification of the commercial banks, Evaluating the effect of loan divers Ulcation on interest rate spread on institution performance, identifying the factors that are contributing to high interest rate spread in Nigeria, Examining the determinants of loan divers fication. In other to successfully accomplish these objectives, the following research questions were drawn; What are the interest rate spread and loan diversification of the commercial banks? Does divers Ulcation have any effect on interest rate spread and performance? Which factors contributed significantly to the widening spread? What are the determinants of loan diversification? Data were collected mainly from secondary sources which includes CBN statistical bulletin, union and first bank annual reports. The method of data analysis includes the use of Net interest margin, loan diversity index, the Pearson correlation coefficient and multiple regressions. The result shows that the correlation coefficient between loan diversification and interest rate spread was negative indicating that an increase in the interest rate spread will lead to a decrease in loan diversification. Based on the findings, the researcher recommends that commercial banks should apply stringent regulations on interest rates charged by banks to regulate their interest rate spreads and they should also apply rigorous policies on loan advances to make sure that loans are awarded to those with ability to repay and mitigate moral hazards such as insider lending.