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.
Highlights
The increasing documentations of non-payment of either loan principals or loan interest in at least 90 days are alarming and most responsible for financial sector problems experienced in Nigeria (Adeyemi, 2011; Benji, 2013; Samayo, 2010). Hamisu (2011) posited that the banks and other economic industries drive and played key part in the socio-economic growth in the Nigeria Economy where they provide multiple economic supports that contribute positively to the survival of the Nigerian Economy
The study confirms the presence of long run relationship among Non-Performing Loan and the performance of Deposit Money Bank in Nigeria and affirms that only Non-Performing Loan has significant effect on Bank Performance in the Long run and the Short run as well the speed of adjustment of the explanatory variables are significant the speed of adjustment towards long-run equilibrium is very high, that is, there is 177 percent increase over the previous year
The study concluded that persistence increase in Non-performing loans results in poor Performance of Deposit Money Banks in Nigeria
Summary
The increasing documentations of non-payment of either loan principals or loan interest in at least 90 days are alarming and most responsible for financial sector problems experienced in Nigeria (Adeyemi, 2011; Benji, 2013; Samayo, 2010). Hamisu (2011) posited that the banks and other economic industries drive and played key part in the socio-economic growth in the Nigeria Economy where they provide multiple economic supports that contribute positively to the survival of the Nigerian Economy. The increasing documentations of non-payment of either loan principals or loan interest in at least 90 days are alarming and most responsible for financial sector problems experienced in Nigeria (Adeyemi, 2011; Benji, 2013; Samayo, 2010). Many banks in Nigeria today are making huge losses due to the problem of non-performing loans. This is a negative impact against the banks' intermediate role in economic growth. Nigeria banking system is regulated and monitored by the bank of Nigeria with the Banking Act made by the parliament of Nigeria. The Acts has regulations which guide the activities of all banks and some other financial institutions in the country
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