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Abstract:
The study examined the impact of non-performing loans on the bank performance in Nigeria. The approach used is a clear departure from previous studies as it made use of earning ratio of the banks precisely return on asset and profit after tax measures on bank performance. The independent variables used are non-performing loans, loan and advances, total deposits and lending rates. Auto-regressive distributed lags ARDL and Vector auto-regression VAR are applied. The results show that all the variables show significant long and short run relationships with ROA but not with PAT. The relationship between PAT and NPL with other variables are analysed via VAR since co integration could not be established. The VAR result indicates that PAT as measure of bank performance is more responsive to changes in total deposits more than any other variable including the NPL. It is concluded that ROA appears to be a better measure of bank performance when studying effects of NPL as it shows that it has significant negative impact on ROA but the PAT does not show any significant response to NPL
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