CREDIT RISKS AND FINANCIAL PERFORMANCE OF LISTED DEPOSIT MONEY BANKS IN NIGERIA: AN EMPIRICAL INVESTIGATION
Mike Ezekiel Elton Micah and Ademo Ojo Yusuf
Volume 13 Issue 2
Abstract
Deposit money banks in Nigeria have experienced a number of failures due to its financial performance resulting in poor returns, with non-performing loans (NPL) becoming the main precursor, they are now forced to adjust their loan-to-deposit ratio (LDR) and loan loss provision (LLP). However, in this study attempt was made to assess the effects of NPL, LDR and LLP on the financial performance of the DMBs in Nigeria, using both correlation and panel data multiple regression analyses at 5% level of significance using STATA 14 statistical software. In order to achieve this, this study used secondary data collected from a sample of 8 DMBs in Nigeria between 2019 and 2024 inclusively. The findings of this study reveals that there is an insignificant negative relationship between ROE and NPL (r = -0.215, p = 0.142), ROE and LDR (r = -0.129. p = 0.381) and ROE and LLP (r = -0.241, p = 0.099). It is therefore concluded that even though credit risk have negative effects, they are not significant enough to affect on financial performance of DMBs in Nigeria. This study recommends that, appropriate measures should be taken by the CBN to ensure DMBs comply with the current regulatory framework as regard credit and loan services provisions. In addition, the DMBs should also ensure that they reduce the level of NPL by placing strict and compliable regulations while providing credit facilities to clients and customers. Keywords: Non-Performing Loan, Loan-to-Deposit, Loan Loss Provision, Return on Equity
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