EFFECTS OF CREDIT FAILURES ON FINANCIAL PERFORMANCE OF NIGERIAN BANKS; CHM

Department → Accountancy

Amount → ₦10,000.00

ABSTRACT   The study examined the effects of credit failures on financial performance of Nigerian Banks. The objectives were to; examine the effect of Non-Performing Loans Ratio (NPL) on the profit for the year of banks in Nigeria; ascertain the extent to which deposit ratio affect the profit for the year of banks in Nigeria and determine the effect of 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 Non-Performing Loans Ratio (NPL) has negative and significant effect on the profit for the year of Nigeria banking sector, deposit ratio positively and significantly affect the profit for the year of Nigeria banking sector and leverage ratio has negative and significant effect on the profit for the year of Nigeria banking sector. The implication of the study is that non performing loans in banks are deleterious to banks’ profitability while customers’ deposit 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 furthermore, the Internal Control Departments of banks should also be strengthened and empowered to adequately tackle the problem of high level of non-performing loans in banks. There is need for bank management to devise new methods of enhancing customers’ deposits. Management of banks should ensure that financial decisions taken are in consonance with the shareholders’ wealth maximization objectives which encompasses the profit maximization objective of the firm. .




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