CAUSATIVE FACTORS FOR NON-PERFORMING LOANS OF DEPOSIT MONEY BANKS IN NIGERIA: A CRITICAL EXAMINATION (1997-2007)
The study was principally made to appraise the loan portfolio of DMBs in Nigeria with the aim of finding the magnitude and trend of non-peforming loans (NPLs) and the factor responsible fo that. The problem x-rayed here stems from the high magnitude NPLs in the loan portfolio of DMBs as evidenced in recent joint examination of banks carried out by CBN and NDIC. NPLs put bank in a position of under capitalization which will in turn lead to crises and distress. In order to tackled the above problem, six specific objectives and five research questions were designed to guide the study. Four hypothesis were formulated and tested in the course of the study. The study, which is a survey design, used six DMBs in Onitsha metropolies. Both primary and secondary data from these banks were used in achieving the set objectives. Though the population of the study comprised 410 staff of the six banks selected, the study however limited target population to only 111 senior bank officials who take part in decision – making. The questionnaire was the main instrument used to collect primary data. The 32 – item questionnaire was validated by three experts, and was pre-tested and it yielded a reliability coefficient of 0.857. The secondary data used included NPLs of DMBs and GDP of Nigeria (1997 – 2007). Mean, t-test, and Pearson correlation coefficient statistical tools were used to analyse the data collected. The result showed that NPLs of banks is in upward trend and stood at about 32% of the entire loans granted by banks. Poor credit administration by banks, lapses in CBN/NDIC supervisory over-sight, weak corporate governance, and poor economic situation in Nigeria contributed to the above problems. It was recommended among others that banks should review their lending policies; CBN should review the existing corporate governance code, and that the supervisory bodies should apply full weight of law on erring banks.