ABSTRACT

The study examines the effect of credit risk on performance of deposit money banks in Nigeria over the period 2014 – 2023. A longitudinal research design was adopted for the study. The population of the study consists of twelve (12) deposit money banks listed on the Nigerian Exchange limited as at 31st December, 2023. Since we are using a census sample, the entire twelve (12) listed deposit money banks was selected to form the sample of the study. Credit risk indictors considered in this study includes non-performing loans, capital adequacy ratio, loan and advances and loan loss provisions while deposit money banks performance was proxy by return on asset. Firm size was included in the model as a control variable. Panel data techniques  was utilized to examine the effect of credit risk on performance and Hausman specification test confirmed that fixed effects model was more appropriate for the study. The findings of the study reveals that non-performing loans, loan loss provisions and firm size has significant effect on deposit money banks performance while capital adequacy ratio and loan and advances insignificant effect on deposit money banks performance. The study recommends among others that regulatory authorities and deposit money banks should ensure that non- performing loans and loan loss provisions of deposit money banks is reduced since it adversely influences deposit money banks. Also, less attention should be paid to capital adequacy ratio and loan and advances of deposit money banks in Nigeria since they are not key factors that influences deposit money banks in Nigeria.