Non-Performing Loans and Performance of Deposits Money Banks in Nigeria
- November 6, 2020
- Posted by: RSIS Team
- Categories: Banking and Finance, IJRISS
International Journal of Research and Innovation in Social Science (IJRISS) | Volume IV, Issue X, October 2020 | ISSN 2454–6186
Non-Performing Loans and Performance of Deposits Money Banks in Nigeria
Okoli, Chukwudi Francis1, Ifurueze, Meshack S2, Nweze, Augustine U.3
1Department of Accountancy, Chukwuemeka Odumegwu Ojukwu University , Anambra State, Nigeria.
2Department of Accountancy,Chukwuemeka Odumegwu Ojukwu University, Anambra State, Nigeria.
3Department of Accountancy,Enugu State University of Science and Technology, Enugu State, Nigeria.
Abstract: The study examined the relationship between non-performing loans and performance of deposits money banks in Nigeria. The specific objectives of the study are to: determine the relationship between non-performing loans to total loans and performance of deposits money banks; ascertain the relationship between liquid assets to total assets and performance of deposits money banks. Ten (10) banks were selected from the Nigeria Stock Exchange (NSE). The data used were secondary data and were drawn from 2009 to 2018. The data used were sourced from the bank’s annual report and Nigerian Stock Exchange fact book. The data collected were analysed using correlation matrix. The results show that non-performing loans to total loans have no significant relationship with performance of deposits money banks in Nigeria; whereas liquid assets to total assets have significant relationship with performance of deposits money banks in Nigeria. The study, therefore among others recommends that the Regulatory agency such as the Central Bank of Nigeria and the Nigerian Deposit Insurance Corporation should formulate rules that will reduce the occurrence of Loans for which repayment of principal or interest has been overdue for three months or more. Since non-performing loans to total loans have negative relationship with performance of deposits money banks in Nigeria.
Keywords: non-performing loans, performance, liquid assets, Banks, Nigeria.
I. INTRODUCTION
1.1 Background to the Study
The financial soundness indicators (FSIs) were introduced following the financial crises of the 1990s to provide country indicators relating to the existing financial health and reliability of financial organizations, as well as to that of the commercial and household segments (Restoy, 2017). The essential indicators are built on the CAMELS (Capital adequacy, Asset quality, Management soundness, Earnings, Liquidity, Sensitivity to market risk) rating system, which is a generally used managerial structure for the valuation of individual banks’ financial reliability (Athanasoglou, Brissimis & Delis, 2008). The framework considers a bank’s capital adequacy, asset quality, management, earnings, profitability, liquidity and sensitivity to market risk (Restoy, 2017). Thus, in essence the FSIs follow a micro sensible reason. But, when combined, they deliver a picture of the health of countrywide and worldwide financial organizations, and help in aiming to potential susceptibilities that may require being addressed with whichever micro- or macro prudential policies.
