Effect of Non-Performing Loans on the Performance of Deposit Money Banks in Nigeria

Abstract

This study investigated the effect of non-performing loans on financial performance of listed deposit money banks in Nigeria. Secondary data was obtained from 2012-2023 and the study population comprised all listed deposit money banks, out of which 14 were sampled. Panel data obtained were analyzed using descriptive, regression diagnostic and inferential statistical tools. The fixed random effect panel regression result revealed that non-performing loans (tvalue = -3.02; p-value = 0.003 < 0.05%) significantly influence financial performance of the listed deposit money banks in Nigeria. The study recommends that management of deposit money banks should be more equipped with the right skills and experience in ensuring safe and smooth use of provision of loans losses. The study contributes to knowledge by showing that non-performing loan significantly affects performance of deposit money banks in Nigeria. In addition, future studies may consider extending data till 2024 as well as investigating how investments and cash flow decisions can mediate in the relationship between credit risk management and financial performance and value of deposit money banks in Nigeria.