This study evaluated the effect of toxic asset on financial performance of commercial banks in Nigeria. Other specificobjectives include: specifically it assesses the effect of bad and doubtful on return on assets, the effect of Loans and advances on returnon assets and studied the effect of doubtful debts on their return on assets. The study employed secondary data. The data was collectedfrom quoted companies in Nigeria, published financial statement of the banks from 2007-2016. The annual report is covers a period of10 years.The study shows that growing continuation in the amount of bad and doubtful debts in Nigeria money deposit banks are causesby inadequate close monitoring of the borrowers to ensure proper utilization of fund (i.e. on site visit to factory or project site), incessantincrease in interest rate (lending rate), lack of adequate knowledge of the loan seeker, failure by commercial banks to give their loanimmediate follow-up to avoid diversion and poor credit policy administration The study recommends that Nigerian commercial banksshould maintain a higher level of increase in provision for bad and doubtful debt to compensate any default for loan repayment and stillmaximize profit, banks should have clear corporate credit policy that will incorporate credit objectives and credit control mechanismsand there should be higher provisions for bad and doubtful debts to take care of eventual defaults. . It therefore concludes that that badand doubtful debt has no significant effect on banks return on asstes. Thus, well-organized and efficient credit management remains ahidden treasure the exact value of which undiscerning boards may be unaware.