Determinants of Non-Performing loans of Nigerian Deposit Money Bank

Determinants of Non-Performing loans of Nigerian Deposit Money Bank

Author by Sanyaolu, Wasiu Abiodun

Journal/Publisher: Economic Horizons

Volume/Edition: 22

Language: English

Pages: 29 - 42

Abstract

Credit risk is one of the biggest challenges banks in Nigeria are faced with. By implication, it is also the
one with dire consequences for their operation and survival, given the fact that a series of banks’ failures
have significantly been brought into connection with nonperforming loans. Thus, this study examined
the bank-specific and macroeconomic determinants of the nonperforming loans of the listed Deposit
Money Banks (DMBs). Regression analysis involving fixed effect was adopted in order to analyze the
panel data of the 10 selected deposit money banks in the period from 2008 to 2017. The findings show that
the capital adequacy ratio, the size and the loans-to-total-assets ratio negatively and significantly affect
nonperforming loans, whereas profitability and age were found to significantly but positively influence
nonperforming loans of the Nigerian deposit money banks. More so, the liquidity ratio negatively,
but insignificantly, affects nonperforming loans. However, not a single macroeconomic variable
exerts a significant effect on nonperforming loans. The study recommends that banks should always
deploy strategies for credit risk management by taking cognizance of the bank-specific and economic
determinants of the nonperforming loans


Other Co-Authors