Determinants of Non-performing Loan in Nigeria Deposit Money Banks

ABSTRACT

This study was carried out to investigate the determinant of Non-performing loans in Nigeria Deposit Money Banks. It specifically analysed the trend of Non-performing loans in Deposit Money Banks; examine if loan to asset ratio is a determinant of Non-Performing loan of Deposit Money Bank in Nigeria; and examine if loan to deposit ratio is a determinant of Non-Performing loan of Deposit Money Bank in Nigeria.

The study cover ten (10) selected Deposit Money Banks in Nigerian for the period of 5 years 2012-2016. Data were be obtain from secondary sources such as financial statement of the selected banks, Central Bank of Nigeria statistical bulletin and National Bureau of Statistics. In this study, leverage ratio, loan asset ratio and loan to deposit ratio were used as proxy for determinant of non-performing loan while non-performing loan was the dependent variable Regression analysis was used to analysed the hypotheses stated in the study.

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Findings from the study depicts that leverage ratio has a positive significant effect on non-performing loan at 0.05 level of significance of 0.0144. Loan to deposit ratio has a negative insignificant effect on non-performing loan at 0.05 level of significance of 0.9249. Loan to asset ratio has a positive significant effect on non-performing at 0.05 level of significance of 0.0367.

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It was concluded that leverage ratio and loan to asset ratio were determinant of non-performing loan while loan to deposit was not a determinant of non-performing loan of deposit money banks in Nigeria. The study recommended that banks should use bank specific variables conditions such as leverage ratio and loan to asset ratio in predicting the level of non-performing loans.

 

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