RISK PARAMETERS AND PROFITABILITY OF LISTED DEPOSIT MONEY BANKS IN NIGERIA

Abstract

This paper assesses the impact of risk parameters on the profitability of listed deposit money banks in Nigeria. Profitability was measured using return on assets (ROA), while the risk parameter as the independent variable was proxied by Credit Risk (CRR) and Liquidity Risk (LQR). The population of the study are all fourteen (14) deposit money banks listed in the Nigerian Stock exchange as of 31St December 2020 out of which a sample of eleven (11) listed deposit money banks were used for the analysis. A quantitative correlational research design was used and data were generated from secondary sources, basically from the annual reports and accounts of eleven listed deposit money banks from 2009 to 2020. Descriptive statistics, correlation analysis, as well as the panel, corrected standard error regression were utilized as tools of analysis for the study. The findings reveal that credit risk has a negative and insignificant impact on profitability measured by the ROA of listed deposit money banks in Nigeria, while liquidity risk has a positive and significant effect on the profitability of listed deposit money banks in Nigeria. The study recommends that the Management of listed deposit money banks in Nigeria needs to control their credit risk by reducing their non-performing loans to the barest minimum because this ratio is severely affecting the profitability of banks. Also, the management of listed deposit money banks in Nigeria should increase and moderates its concentration on loan and advances and also find strategies to increase customer deposits.