ABSTRACT

The study examined the  effect of non-performing loans  on the performance  of selected commercial banks in Nigeria. It specifically  determined the effect of non• performing loans, provisions for loan loss and advances on the performance of banks measured by return on assets and return on equity. The study utilized secondary data obtained from the annual report of commercial  bank in Nigeria. The data were analysed  using the simple regression  model and objective  three which is to examine the trend between non-performing .loans  and commercial  banks performance in Nigeria was analysed with descriptive analysis. The specific finding of the work is that return on assets and return  on equity have  inverse  relationship  with non• performing loans and advances. The conclusion therefore is that the effect of non• performing loans  on commercial  banks performance  is  negative  and cannot be underestimated and poses a fundamental  danger to the very existence of the banks as  corporate  business   enterprises.   Based  on  the  above  findings,   the  work recommends that banks should maintain high credit standards while the apex bank and the  regulatory agencies  should  maintain high  surveillance on banks credit operations. 

TABLE  OF CONTENT

CHAPTER ONE:  INTRODUCTION

Background  to the study

1.2 Statement  of the problem 1

1.3 Objectives  of the study 3

1.4 Research  Questions 5

1.5 Research  Hypothesis 5

1.6 Scope of the study 6

1.7 Limitations 6

1.8 Definition  of  terms 7

CHAPTER TWO: LITERATURE  REVIEW

2.1       The conceptual  framework                                                                            9

2.1.1    The concept  of non-performing   Loans                                                        9

2.1.2     Classification  of loans as non =perfonning                                                  12

2.1.3    Reclassification   of non -performing    loans as performing                          14

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2.1.4   Causes of non - performing  loans                                                                 14 

2.1.5 The Determinants   of non-performing  loans 17

2.1.6 The Determinants   of non-performing  loans 20

2.1.7 Solution to the Problem  of non-performing loans 22

2.2 Theoretical  Framework 32

2.2.1 Loan Pricing  Theory 32

2.2.2 Firm Characteristics   Theories 33

2.2.4 Bank Risk Management   Theory 35

2.3 Empirical   Review 36

CHAPTERTHREE: METHODOLOGY

3.1     Research  design                                                                                              47

3.2     Sources of Data                                                                                               47

3.3       Population   of the Study and Method  of Data Collection                           47

3.4     Sample  Size                                                                                                              47

3.5       Techniques  of the data analysis                                                                    48

3.6       Model  Specification                                                                                         48

CHAPTER FOUR: DATA PRESENTATION,   ANALYSIS  AND DISCUSSION OF FINDINGS

4.1.1      Data presentation                                                                                             50

4.2      Data analysis                                                                                                   50

CHAPTER FIVE

5.0 SUMMARY,  CONCLUSION AND RECOiv1MENDATION

5.1 Summary  of findings 56

5.2 Conclusions 56

5.3 Recommendations 56