Causal Relationship Between Asset Quality And Profitability Of The Nigeria Banking Industry
ONAH, Chukwunalu Raphael
United Bank for Africa PLC, Rivers State University, Port Harcourt, Nigeria
IWEDI Marshal PhD
Department of Banking and Finance, Rivers State University, Port Harcourt, Nigeria
LEERA, Lenu Kpagih
Department of Economics, Rivers State University, Port Harcourt, Nigeria
Keywords: Asset Quality, Non-Performing Loan, Commercial Banks, Granger Causality Framework, Nigeria
Abstract
This study investigates the causal effects of asset quality shocks on the profitability of Nigeria banking industry for a period of 11 years ranging from 2008 to 2021.Time series data were sourced from the Nigeria deposit insurance corporation annual reports and accounts, CBN financial stability report and CBN statistically bulletin for various years. The granger causality framework was employed in analyzing the time series data. The result shows evidence of causality between asset quality and return on asset of commercial banks in Nigeria. Based on this we conclude by saying that maintaining sound assets quality position is critical to the long-term performance, survival and sustainability of banks in Nigeria.