Evaluation of the Effect of Noncurrent Assets on Profitability in Nigerian Banking Sector: Evidence From Panel Data

Abstract

This study examined the effect of noncurrent assets on profitability of sampled Nigerian commercial banks. Secondary data were used in this study. The data was obtained from annual reports accounts of ten (10) Nigerian commercial Bank purposefully selected from 2006 to 2017. Panel Data analysis technique was used to analyse the effect of independent variables (Building, Land, Leasehold premises, fixtures and fitting, and investment in computers) on dependent variable (Net profit). Results showed that there is a positive significant effect of BDG, ICT, MACH on NETPR (β= .0052578; .0195288; .0719033 t = 0.001, 0.000; 0.009 < 0.05). (β= .0195288, t = 0.000 < 0.05). LEASE, LAND, and FIXF also had positive significant effect of LEASE on NETPR (β = .0434922; .1678305; .0499863 t = 0.007; 0.005; 0.000 < 0.05). In conclusion, investments in noncurrent assets had positive significant impact on the Nigerian Banks’ profitability. Noncurrent assets are used to generate revenue for the benefits of shareholders. It is recommended that banks should establish efficient noncurrent asset management and optimization program in the bank in order to improve their profitability. This program should be designed to eliminate or reduce the effect of carry cost for assets that are no longer needed or used in the bank. Banks should also improve the investments in noncurrent assets in terms of ICT so as to boost their profitability.