Determinants of Non-Performing Loans in Nigerias Deposit Money Banks

The study examines the relationship between bank specific and macroeconomic determinant of non-performing loans in Nigerian deposit money banks over the period of 5 years (2010 to 2014). A sample of 10 banks out of 15 quoted by the Nigerian Stock Exchange (NSE) was considered on a cross sectional basis. The study adopted non-survey research design and secondary data was used, generated from the bank's annual reports and accounts, Central Bank of Nigeria (CBN) and Nigerian Stock Exchange fact book respectively. The data were analysed using descriptive statistics, correlation coefficient and multiple regressions. As thus, Stata (version 12) was used as a statistical tool for data analysis. The findings reveal positive significant relationship between Non-Performing loans and Loan to deposit and Bank size; whereas relationship between capital adequacy ratio and Inflation reveals a positive insignificant relationship; whereas Return on asset had negative insignificant relationship with the rate of non-performing loans. Based on the findings, it is recommended that CBN for policy purposes should frequently assess the lending habit of deposit money banks in Nigeria. Finally, strengthening securities market will have a positive impact on the general improvement of the banking institutes' thereby increasing the effectiveness of the financial sector.