Determinants of Non-Performing Loans in Deposit Money Banks in Enugu State, South East Nigeria

Non-performing loans represent a systemic threat to the stability of deposit money banks and the broader financial system, and identifying their determinants is essential for proactive risk management. This study examines the determinants of non-performing loans in deposit money banks operating in Enugu State, South East Nigeria. A descriptive survey research design was employed, and primary data were collected from 210 bank officers across 12 branches of six deposit money banks in Enugu metropolis. Secondary data were also sourced from branch performance records for the period 2018 to 2022. Variables examined included borrower income instability, collateral adequacy, bank-specific lending concentration, macroeconomic conditions (proxied by inflation and unemployment rates), and loan monitoring frequency. Multiple regression analysis was used to identify significant determinants. Results showed that borrower income instability (beta = 0.44, p < 0.01) and inadequate collateral valuation (beta = 0.37, p < 0.01) were the strongest positive predictors of non-performing loans, while loan monitoring frequency was a significant negative predictor (beta = -0.29, p < 0.05). Inflation rate had a significant positive effect at the 10% level. The study concludes that both bank-specific practices and macroeconomic factors jointly drive non-performing loan accumulation in Enugu State deposit money banks. It recommends that banks adopt dynamic collateral revaluation systems and invest in automated loan monitoring platforms to reduce credit default risk in the South East zone. Keywords: non-performing loans, deposit money banks, credit risk, Enugu State, determinants