Effects of Credit Failures on Financial Performance of Nigerian Banks
- Post by: airjournal
- September 7, 2022
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The study examined the effects of credit failures on the financial performance of Nigerian Banks. The objectives were to; examine the effect of the Non-Performing Loans Ratio (NPL) on the profit for the year of banks in Nigeria; ascertain the extent to which the deposit ratio affects the profit for the year of banks in Nigeria and determine the effect of the leverage ratio on the profit for the year of banks in Nigeria. Ex–post facto design was adopted while the analytical tools used were unit root test, descriptive statistics, and random panel regression model. The study found out that the Non-Performing Loans Ratio (NPL) has a negative and significant effect on the profit for the year of Nigeria banking sector, the deposit ratio positively and significantly affects the profit for the year of Nigeria banking sector and the leverage ratio has a negative and significant effect on the profit for the year of Nigeria banking sector. The study implies that nonperforming loans in banks are deleterious to banks’ profitability while customers’ deposits promote banks’ profitability as banks use such deposits for investment purposes to improve profits. The study recommended that prudential supervision of banks should be encouraged, as well as strengthening the activities of the Asset Management Corporation of Nigeria (AMCON) to deal with the problem of non-performing loans in the banking sector, and the Internal Control Departments of banks should also be strengthened and empowered to adequately tackle the problem of the high level of non-performing loans in banks. There is a need for bank management to devise new methods of enhancing customers’ deposits. Management of banks should ensure that financial decisions taken align with the shareholders’ wealth maximization objectives which encompass the profit maximization objective of the firm.
Keywords: Credit Failures; Financial Performance; Nigerian Banks
Authorship: Ude, A. E., Prof Inyiama, O., and Madukwe, C. J. | FULL PDF