Credit Risk and Profitability of Banks in Nigeria
Student: MICHAEL OLADIMEJI OMOJOLA (Project, 2025)
Department of Banking and Finance
University of Port-Harcourt, Rivers State
Abstract
Abstract
This study investigates the impact of credit risks on the profitability of banks in Nigeria from 2000 to 2022, employing the Ordinary Least Squares (OLS) regression technique for analysis. The study specifically examines how non-performing loans and liquidity risks influence banks’ return on assets (ROA). The empirical findings reveal that non-performing loans have a negative and insignificant relationship with banks’ profitability, indicating that increases in non-performing loans tend to reduce profitability, though not significantly. Conversely, liquidity risks show a positive but insignificant relationship with profitability, suggesting that the existing banking policies and structures in Nigeria have effectively mitigated liquidity-related challenges, preventing them from adversely affecting performance. Based on these results, the study concludes that banks aiming to improve profitability should minimize non-performing loans, as high default rates reduce loanable funds and, consequently, returns on assets.
Keywords
For the full publication, please contact the author directly at: michaeloladimeji17@gmail.com
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Institutions
- Abdul-Gusau Polytechnic, Talata-Mafara, Zamfara State 3
- Abia State Polytechnic, Aba, Abia State 24
- Abia State University, Uturu, Abia State 71
- Abraham Adesanya Polytechnic, Ijebu-Igbo, Ogun State 3
- Abubakar Tafawa Balewa University, Bauchi, Bauchi State 15
- Abubakar Tatari Ali Polytechnic, Bauchi State. (affiliated To Atbu Bauchi) 1
- Achievers University, Owo, Ondo State 6
- Adamawa State University, Mubi, Adamawa State 8
- Adekunle Ajasin University, Akungba-Akoko, Ondo State 26
- Adeleke University, Ede, Osun State 1