ISSN 28111915 AJORMS; Url: https://ajormsplasu.ng; E-mail: info@ajormsplasu.ng Vol. 3 [1] June, 2023
https://doi.org/10.62244/ajorms.v3i1Effect Of Loan-To-Asset Ratio On Non-Performing Loans In Deposit Money Banks In Nigeria.
Wuyep Tony Lohven1 and Abdul Adamu2
1Department of Business Administration. Bingham University, Karu. tonywuyep59@gmail.com
2Department of Business Administration Nasarawa State University, Keffi.
ABSTRACT
This study examined the effect of loan-to-asset ratio (LAR) on Non-Performing loans in
deposit money banks in Nigeria. The study used an ex post facto research design. The population
of the study comprised all the 14 quoted deposit money banks in Nigeria with a sample size of
eight (8) deposit money banks licensed with international authorities consisting of Access
Bank Plc., Fidelity Bank Plc., First City Monument Bank Plc., First Bank Nigeria Ltd.,
Guarantee Trust Bank Plc., Union Bank of Nigeria Plc., United Bank for Africa Plc and
Zenith Bank Plc. Data was generated from the annual financial reports and accounts of the
sampled deposit money banks, the Central Bank of Nigeria, and the Nigerian Exchange Gro
up respectively. Descriptive statistics, correlation tests and Panel regression were used for
analysis. Panel regression was used to analyze the data and the findings showed that loan-toasset ratio has a negative and significant effect on non-performing loans of deposit money banks
in Nigeria. Furthermore, bank size has a positive and insignificant effect on non-performing loans
of deposit money banks in Nigeria. The study recommends that the CBN should constantly update
its supervisory skills and strategies while enforcing its lending policy guidelines to achieve
stability in the banking sector. Similarly, management of Deposit Money Banks should avoid
charging high-interest rates on loans and advances as well as lending to high-risk borrowers to
bring cases of loan defaults to the barest minimum. This measure will no doubt curtail the
excessive accumulation of bad loans and financial crises in the banking sector.
Key words: Loan to Asset Ratio, Deposit Money Banks, Non-performing Loan and Bank Size