NON-PERFORMING LOAN AND PERFORMANCE OF LISTED DEPOSIT MONEY BANKS IN NIGERIAː MODERATING EFFECT OF BOARD FINANCIAL EXPERTISE

Abstract

Banks carry out an important function of providing funds from surplus units and channel such funds to the deficit units of the economy. This function ensures that limited resources are allocated efficiently among different users. However, the study examined the moderating effect of board financial expertise on the relationship non-performing loan and performance of listed deposit money banks in Nigeria for a period of 2018-2023 using panel data collected from the audited annual financial statements of twelve (16) banks. Ex-post facto research design and the Generalized Least Squares method was used in its estimations with the aid of STATA Software Version 14. The study found that non-performing loan, loan loss provision ratio and loan and advances ratio have significant negative effect on the performance of listed deposit money banks in Nigeria. Board financial expertise did not only have direct significant positive effect on the performance, but it also moderates the relationship between nonperforming loan variables (non-performing loan, loan loss provision ratio and loan and advances ratio) and performance of listed deposit money banks in Nigeria. However, the study recommended that CBN should mandate DMBs Boards and Managements to make sure that sufficient procedures are implemented to lessen the negative effect of non-performing loans on their day-to-day operations and Boards of DMBs in Nigeria should be made up of members who have financial expertise in dealing with the activities of the banks.