Title: NON-PERFORMING LOANS AND FINANCIAL PERFORMANCE OF DEPOSIT MONEY BANKS IN NIGERIA
Authors:
OSAYI, Valentine Igbinedion, Ph.D, FCILRM, FERP and AKEMIEYEFA, Matthew, Ph.D
Abstract:
The study sought to investigate the impact of nonperforming loans on the financial performance of deposit money banks in Nigeria from 1991 to 2021. Specifically, the study hypothesizes that non-performing loans do not have significant impact on the financial performance of deposit money banks in Nigeria. Using data sourced from the Central Bank of Nigeria (CBN) Statistical Bulletin for various years and with the aid of the Ordinary Least Square (OLS) Regression technique as embedded in Eview8.0 econometric software for data analysis, the findings revealed that nonperforming loans have negative significant impact on the financial performance of deposit money banks in Nigeria. Based on the foregoing finding, the study recommended that, the Central Banks of Nigeria (CBN) as the major regulatory authority of the money market in Nigeria in which Deposit Money Banks (DMBs) are active participants should formulate policies that would help to reduce the incidence of high proportion of nonperforming loans in the banking system. There should be regular intervention of the Central Bank of Nigeria in regulating the operational modalities of deposit money banks in Nigeria such that would moderate the excessive lending rate being charged by them. This will go a long way in reducing the incidence of banks’ failures occasioned by high proportion of nonperforming loans in their loan portfolio.
Keywords: Non-Performing Loans, Deposit Money Banks, Financial Performance.
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