Non-Performing Loans and Performance of Listed Deposit Money Banks in Nigeria

Abstract

The issue of Non-Performing Loan has become a matter of serious concern among listed deposit money banks in Nigeria, as loans granted by banks to their customers are often not being repaid according to the terms and conditions of the loan agreement. The effect of this on the financial performance of banks is the reduction in banks' profit and their intermediation capacity. Therefore, this study investigated the impact of non-performing loans (NPL) on the performance of listed deposit money banks in Nigeria; using Return on Asset as performance variable. The study employed" ex-post facto" research design because of the availability of published audited financial statements of listed deposit money banks as contained on the Nigerian Exchange Group Website and Fact Book 2022.The population of the study comprised all the 10 listed deposit money banks for the period of the study (2009-2022) ;while census sampling technique was employed to select all the 10 listed deposit money banks because they were not delisted, and their operations were not disrupted during the period. Descriptive statistics, correlation analysis and panel data estimation techniques were employed for data analysis. The findings revealed that Non-Performing Loan have statistically positive and significant impact on Return on Asset with p-value 0.01386. Therefore, the study recommended that banks should place a strong emphasis on enhancing their credit risk management practices maintain strong Capital employed to mitigate the potential negative impact of Non- Performing Loans. This includes implementing more rigorous credit assessment procedures, improving loan portfolio diversification, and closely monitoring the credit worthiness of borrowers