DEBT RECOVERY MECHANISMS AND PROFITABILITY OF DEPOSIT MONEY BANKS IN NIGERIA

Nigerian banking sector plays a critical role in the economy by facilitating financial transactions and providing loans to individuals and businesses. However, the sector faces significant challenges due to high levels of non-performing loans (NPLs), which adversely affect profitability. This study thus examines the impact of debt recovery mechanisms on the profitability of deposit money banks (DMBs) in Nigeria. The specific objectives of the study were to determine the effect of debt recovery mechanisms on the Net Interest Margin, assess the effect of debt recovery mechanism on the Return on Assets, and to examine the effect of debt recovery mechanism on the Return on Equity of the selected banks. The study employs a quantitative research design, using secondary data from the financial statements of 10 listed DMBs over a 10-year period (2014–2023). The debt recovery mechanisms were measured using indicators of debt recovery rate (DRR) and credit risk assessment (CRA). The profitability of deposit money banks (DMBs) in Nigeria was measured by Return on Assets (ROA), Return on Equity (ROE), and Net Interest Margin (NIM). Descriptive and inferential statistics were used to analyse the relationship between debt recovery mechanisms and profitability indicators of the selected banks. The study reveals that debt recovery mechanisms (DRR and CRA) do not have a significant effect on the return on assets (ROA) of deposit money banks (2.30% P value= 0.309, P vale > 0.05). The study however found that debt recovery mechanism has significant effect on Return on Equity of the selected deposit money banks (33.1%, P value= 0.006, P value