IMPACT OF NON-PERFORMING LOAN ON PROFITABILITY OF DEPOSIT MONEY BANKS IN NIGERIA

Abstract

This study examined the impact of non-performing loan on profitability of Deposit money banks in Nigeria. Annual data were employed and sourced from the Nigerian Deposit and Insurance Company (NDIC) Annual Reports and statement of accounts various issues for the period 2006 -2020) the post 2005 consolidation era. A multiple ordinary least squares regression estimation was employed. The empirical findings revealed that non-performing loan has significant negative effect on profitability of Deposit money banks in Nigeria. Based on this finding, the study concludes that asset quality has significant effect on the profitability of Deposit money banks in Nigeria. It is recommended that managers of banks should continue to practice prudent credit risk management to safeguard shareholders’ funds. Also, deposit money banks need to regularly review their credit policies to further reduce the incidence of bad loans. Lastly, the financial sector regulatory agencies like Central Bank, NDIC, SEC and other should maintain high surveillance on banks’ credit operations.