This study investigates the impact of non-performing loans (NPLs) on the performance of deposit money banks in Nigeria. The rising level of NPLs has become a major concern due to its negative effects on profitability, liquidity, and financial stability. Non-performing loans, defined as loans unpaid for at least 90 days, serve as an indicator of poor asset quality and weak credit risk management. The study adopts a longitudinal research design using secondary data from the financial statements of eight selected deposit money banks in Nigeria over the period 2014–2022. The Panel Autoregressive Distributed Lag (ARDL) model was employed to examine both short-run and long-run relationships between NPLs and bank performance, measured by Return on Equity (ROE). Findings reveal that non-performing loans have a negative relationship with bank performance, with a regression coefficient of -1.234660, indicating that increases in NPLs lead to a decline in profitability. However, the relationship is statistically insignificant, suggesting that NPLs alone may not strongly determine bank performance. Correlation results further confirm a weak negative association between NPL and ROE. The study concludes that although NPLs adversely affect bank performance, their impact is not statistically significant within the study period. It recommends that deposit money banks strengthen credit risk management practices, improve loan monitoring systems, adopt advanced financial technologies, and adhere strictly to regulatory guidelines to reduce loan defaults and enhance performance.
Gurowa et al. (2026) studied this question.