An Empirical Analysis of Toxic Assets and Profitability of Banks in Nigeria

This study evaluated the effect of toxic asset on financial performance of commercial banks in Nigeria. Other specific objectives include: specifically it assesses the effect of bad and doubtful on return on assets, the effect of Loans and advances on return on assets and studied the effect of doubtful debts on their return on assets. The study employed secondary data. The data was collected from quoted companies in Nigeria, published financial statement of the banks from 2007-2016. The annual report is covers a period of 10 years.The study shows that growing continuation in the amount of bad and doubtful debts in Nigeria money deposit banks are causes by inadequate close monitoring of the borrowers to ensure proper utilization of fund (i.e. on site visit to factory or project site), incessant increase in interest rate (lending rate), lack of adequate knowledge of the loan seeker, failure by commercial banks to give their loan immediate follow-up to avoid diversion and poor credit policy administration The study recommends that Nigerian commercial banks should maintain a higher level of increase in provision for bad and doubtful debt to compensate any default for loan repayment and still maximize profit, banks should have clear corporate credit policy that will incorporate credit objectives and credit control mechanisms and there should be higher provisions for bad and doubtful debts to take care of eventual defaults. . It therefore concludes that that bad and doubtful debt has no significant effect on banks return on asstes. Thus, well-organized and efficient credit management remains a hidden treasure the exact value of which undiscerning boards may be unaware.