Implications of Non-Performing Loans on the Nigerian Deposit Money Banks

Abstract

The study examined the arguments and counterarguments within the scientific discussion on the implications of non-performing loans on the Nigerian deposit money banks. The main objective is to examine the effect of Non-Performing loan on the Performance of Deposit Money Banks in Nigeria. Data were sourced from Central Bank of Nigeria Statistical Bulletin. A systematization literary approach for data analysis was Auto Regression distribution lag (ARDL) bound tests. Findings revealed that there exist a long run significant relationship between Non performing loan and the Performance of Deposit Money Banks in Nigeria. It was revealed that persistence increase in Non-performing loans results in poor Performance of Deposit Money Banks in Nigeria. It was also discovered that Non Performing Loan reduces deposit money banks return on asset. The study therefore recommends that deposit money banks should employ competent risk managers that always use their skills to reduce the incident of non-performing loans in the Nigerian deposit money banks. The study also recommends that deposit money banks in Nigeria should always monitor the end-use of funds given to their customers in order to curb the incident of fund diversion which may result in non-performing loan.