Risk Assets Management and Profitability of Listed Commercial Banks in Nigeria.

Abstract

The study examined risk asset management and the profitability of listed commercial banks in Nigeria. Risk asset management was measured using non-performing loans, the capital adequacy ratio, and the debt-to-equity ratio, while profitability was measured using return on assets. An ex post facto research design was adopted for the study. Data were collected from the annual reports of all fourteen (14) listed commercial banks in Nigeria for the period of ten (10) years, ranging from 2015 to 2024. The study engaged the Levin, Lin & Chut* unit root test and the various unit root test results indicated a mixed order of integration. 1st difference generalized method of moments was used for data analysis. The findings revealed that non-performing loans and the debt-to-equity ratio have a significant effect on return on assets, whereas capital adequacy does not. Based on the findings, the study recommends that banks leverage debt to finance profitable investments. They must balance debt use with financial resilience to avoid excessive exposure to economic downturns. Strategies such as setting debt ceilings, using interest-rate hedging instruments, and maintaining a diversified debt structure can help manage leverage effectively.