Effect of Non-Performing Loans on the Profitability of Deposit Money Banks in Nigeria (Project Guide)

By EngrHenryTech Publishing · Banking and Finance

EFFECT OF NON-PERFORMING LOANS ON THE PROFITABILITY OF DEPOSIT MONEY BANKS IN NIGERIA: A COMPLETE PROJECT GUIDE

Departments: Banking and Finance, Accounting, Finance, Economics, Business Administration

ABOUT THIS GUIDE

This is a detailed research guide and framework, not a finished project for submission. It gives you a ready-to-adapt Chapter One, a map for your literature review, a full methodology plan using secondary (panel) data from banks' annual reports, a data collection sheet, empty results tables, and guidance for writing your conclusions. You collect your own data and write Chapters Four and Five from your own results.

SECTION 1: TOPIC AND ALTERNATIVE TITLES

Main topic:
Effect of Non-Performing Loans on the Profitability of Listed Deposit Money Banks in Nigeria ([start year] to [end year])

Alternative titles:
1. Credit Risk and Financial Performance of Deposit Money Banks in Nigeria.
2. Effect of Loan Loss Provisions on the Return on Equity of Nigerian Banks.
3. Determinants of Non-Performing Loans in Nigerian Deposit Money Banks.
4. Effect of Credit Risk Management on the Profitability of Microfinance Banks in [State] (a survey version).
5. Non-Performing Loans and Lending to the Private Sector in Nigeria (a time-series version using CBN data).
6. Effect of Asset Quality on the Performance of Tier-One Banks in Nigeria.

SECTION 2: MODEL CHAPTER ONE

1.1 Background to the Study (model text, rewrite in your own words)

Lending is the main business of deposit money banks and their largest source of income. When borrowers fail to repay as agreed, the loans become non-performing. Under Nigerian prudential guidelines and international practice, a loan is generally classified as non-performing when principal or interest is overdue for 90 days or more. Non-performing loans (NPLs) reduce interest income, require banks to set aside impairment allowances (provisions) that reduce profit, tie up capital, and can threaten a bank's survival if they become large.

Nigeria's banking sector has experienced several periods of high NPLs. During the 2008–2009 financial crisis, many banks recorded large bad loans, particularly on margin loans and oil and gas lending, which led to the intervention of the Central Bank of Nigeria (CBN) in several banks and the creation of the Asset Management Corporation of Nigeria (AMCON) in 2010 to buy bad loans. After the oil price fall of 2014–2016 and the 2016 recession, NPL ratios rose again. The CBN monitors the industry NPL ratio against a prudential threshold and has introduced measures such as the Global Standing Instruction (GSI) to help banks recover loans from borrowers' accounts in other banks. Since 2018, Nigerian banks have also applied IFRS 9, which requires them to recognise expected credit losses earlier than under the previous standard.

Economic conditions, such as inflation, exchange rate depreciation and high interest rates, can increase the difficulty borrowers face in repaying. At the same time, banks' own credit policies, such as how carefully they assess borrowers and monitor loans, affect the quality of their loan books (Berger and DeYoung, 1997). This study therefore examines the effect of non-performing loans on the profitability of listed deposit money banks in Nigeria.

1.2 Statement of the Problem (model)

Despite reforms, NPLs remain a concern for Nigerian banks, and several banks have had to make large impairment charges [support this with figures from the CBN Financial Stability Report or banks' annual reports]. High NPLs may reduce banks' profits and their willingness to lend to businesses, which in turn affects economic growth. Previous Nigerian studies have reported different results on the size and significance of the effect of NPLs on profitability, and many cover periods before the adoption of IFRS 9. This study uses recent data to re-examine the relationship.

1.3 Objectives of the Study

The main objective is to examine the effect of non-performing loans on the profitability of listed deposit money banks in Nigeria. The specific objectives are to:
1. examine the effect of the NPL ratio on return on assets (ROA);
2. examine the effect of the NPL ratio on return on equity (ROE);
3. examine the effect of the loan loss provision ratio on ROA;
4. examine the effect of capital adequacy on the relationship between credit risk and profitability (optional, for advanced students).

WHAT THE FULL GUIDE CONTAINS

The complete guide continues with:
- research questions and null hypotheses matched to each objective;
- significance, scope, limitations and definitions of terms;
- a Chapter Two map: concepts to define, the theoretical framework, how to build the empirical review, and a model statement of the research gap;
- a full Chapter Three plan: design, population, a worked sample-size calculation, sampling technique, validity, reliability and the statistical test for each hypothesis;
- a ready-to-adapt draft questionnaire (or data collection instrument);
- Chapter Four table templates with guidance on interpreting and discussing results;
- a Chapter Five guide to the summary, conclusion and recommendations;
- a list of real starting references, plus a checklist of common supervisor corrections.

Please note: this is a research guide and framework to help you plan and write your own project. It does not contain invented data or results. You collect your own data and write Chapters Four and Five from your own findings.