ABSTRACT
This study focuses on asset quality and deposit money banks profitability in Nigeria. The goal of the study is to examine the extent to which total asset impact profitability of deposit money banks in Nigeria. It also evaluate the effect of bank size on profitability of deposit money banks in Nigeria, as well as to determine the effect of non-performing loans to total assets on profitability of deposit money banks in Nigeria. Lastly, it investigates the impact of capital adequacy on profitability of deposit money banks in Nigeria.
A time series data survey covering the period 2000 - 2021 is used for the study. This study employs OLS econometric technique and descriptive statistics for the empirical estimation of the model.
The outcome of the study revealed that, a positive significant relationship exists between asset quality and the profitability of deposit money banks in Nigeria. Also, a positive significant relationship exists between capital adequacy ratio and ROA of deposit money banks in Nigeria. It is also revealed that a positive but insignificant relationship exists between bank size and the profitability of deposit money banks in Nigeria. And that a unit increase in capital adequacy ratio result in an increase in ROA by 834.4 units in Nigeria. A unit increase in total asset will lead to an increase in ROA by 0.024unit in Nigeria.
The study however recommends that a sound inflation policy should be instituted by the monetary policy makers, as an effective measure of managing inflation rate. It also equally suggested that relevant regulatory authorities should pay more attention to macroeconomic stability and the enhancement of efficiency which will guarantee a more stable economic environment which in turn will encourage the performance of banking sectors for interest and inflation rate stability in Nigeria economy. Finally capital adequacy and bank size should be effectively managed, because failure of effectively managing same will result in an adverse effect.
