Effect of Non-Performing Loans on the Profitability of Selected Development Finance Banks in Nigeria (Published)
This study looked at the effects of bad loans on the profits of development finance banks in Nigeria. The research used data from five major development banks including Bank of Industry, Nigerian Export-Import Bank, Nigerian Agricultural Cooperative Bank, Infrastructure Bank Nigeria, and Development Bank of Nigeria over a 15-year period from 2010 to 2024. The main goal was to find out if non-performing loans, loan loss provisions, interest income reduction, and loan concentration risk have any real effect on bank profitability measured by return on equity. The results showed that these development banks maintained steady but low profitability during the study period, with an average return on equity of 2.10% and ranging from 1.6% to 2.7%. Non-performing loans averaged 4.42% of regulatory capital across all banks, while loan loss provisions averaged 1.19% of total loans. The correlation analysis revealed strong negative relationships between profitability and both loan loss provisions (-0.907) and non-performing loans (-0.887). However, when the study used the more reliable fixed effects model, the results changed significantly. The Hausman test with a chi-square value of 99.334 and p-value of 0.000 confirmed that the fixed effects approach was the best method to use for this analysis. The study found that only loan concentration risk had a significant effect on return on equity (ROE) under the fixed effects model, with a positive coefficient of 0.008 and p-value of 0.010. This means that when banks focus their lending on certain areas, their profits go up slightly. This study concludes that loan loss provision, non-performing loans, interest income reduction, and loan concentration risk impact the return on equity (ROE) of Nigerian development finance banks. It suggests that individual bank management practices significantly influence these risks’ impact on profitability. Non-performing loans to regulatory capital have a significant negative effect on ROE, while interest income reduction rates vary among banks. Based on the conclusions, the study recommends that banks create tailored plans for loan losses, regularly adjust risk and profit plans, and establish strong systems to control bad loans. It also suggests exploring alternative income sources, such as new products, technology, and staff training, and focusing on specific sectors for better profits and risk control.
Keywords: Bank Profitability, Loan Loss Provisions, Non-Performing Loans, Return on Equity, interest income reduction, loan concentration risk
Corporate Governance and Financial Performance of Some Selected Commercial Banks in Nigeria (Published)
This paper investigates the effects of corporate governance mechanisms on selected Nigerian banks’ financial performance from 2018 to 2024, focusing on the impact of board structure, audit committee effectiveness, risk management practices, and governance disclosure on profitability, asset quality, and credit risk management. A mixed-methods research design is adopted for this study, complementing quantitative analysis of financial statements and governance reports with insights from regulatory filings and corporate disclosures. Results show that all governance mechanisms are significant, yet distinct, drivers of financial performance, with risk management practices emerging as the most crucial determinant. Boards with diverse expertise, combined with active audit committees, robust risk frameworks, and transparent reporting by firms, go hand in hand with profitability and reduction of non-performing loans. Based on these findings, this study supports theoretical hypotheses within Agency, Stakeholder, Resource-Dependence Theories while extending the previous literature on the role of board diversity, qualitative audit committee engagement, and disclosure as a source of strategic value. This suggests an integrated approach to governance as an important lesson in teasing out how to prosper in Nigeria’s sometimes hostile banking environment, providing lessons that will be useful in practice for bank management seeking to build stronger institutional performance and resilience, regulators, and other policy actors.
Keywords: Bank Profitability, Board Structure, Corporate Governance, Financial Performance, Nigerian Banks, Risk Management, audit committee effectiveness, governance disclosure