Deposit insurance fund and the quality of risk assets of Nigerian deposit money banks

This paper empirically assesses the relationship between Deposit Insurance Funds (DIF) and the quality of risk assets of listed Deposit Money Banks (DMBs) in Nigeria.The entire fifteen listed DMBs in the country as of 31st December, 2017 were focused on and the secondary data were subsequently sourced from the yearly financials of the Nigeria Deposit Insurance Corporation (NDIC) for a 29-year period covering from 1989 to 2017.The Auto-Regressive Distributed Lag (ARDL) and the Vector Error Correction (VEC) estimation techniques were the basis of estimating the relationship between the variables of interest in this study.Evidence from our analyses indicates that the volume of total deposits and total loans and advances of DMBs have long run negative and statistically significant relationship with DIF.Conversely, the quality of risk assets of DMBs exhibits a positive and insignificant relationship with the target reserve ratio of DMBs.The study thus recommends that regulatory agencies in the banking sector (CBN and NDIC), amongst others, collaborate with listed DMBs to diversify and manage their risk assets by strategically intensifying the implementation of existing measures aimed at minimising incidences of loan default and the alarming levels of non-performing loans in the portfolio of Nigerian DMBs.