Chapter One — 1.1 Background to the Study

Over the past decade, the relationship between non-performing loans and investment decisions has become a subject of considerable debate among scholars and industry practitioners alike, particularly within the context of Selected Commercial Banks in Nigeria where operating conditions differ markedly from more developed markets.

Selected Commercial Banks in Nigeria presents a useful setting for examining this relationship precisely because the conditions there — structural, regulatory, and behavioural — differ from those typically assumed in the broader literature, most of which draws on evidence from more developed economies.

1.2 Statement of the Problem

While non-performing loans is widely discussed in policy and industry circles, empirical evidence on its actual effect on investment decisions within Selected Commercial Banks in Nigeria remains sparse and, in places, contradictory. This lack of localized, rigorous evidence makes it difficult for decision-makers to know with confidence whether current approaches to non-performing loans are helping or hindering investment decisions — a gap this study sets out to close.

1.3 Objectives of the Study

1. To examine the effect of Non-Performing Loans on investment decisions in Selected Commercial Banks in Nigeria.
2. To assess the extent to which non-performing loans influences investment decisions within the study area.
3. To identify the challenges associated with non-performing loans in relation to investment decisions.
4. To recommend strategies for optimizing non-performing loans in order to improve investment decisions.

1.4 Research Questions

1. What is the effect of non-performing loans on investment decisions in Selected Commercial Banks in Nigeria?
2. To what extent does non-performing loans influence investment decisions within the study area?
3. What challenges are associated with non-performing loans in relation to investment decisions?
4. What strategies can be adopted to optimize non-performing loans in order to improve investment decisions?

1.5 Significance of the Study

This study is significant to a range of stakeholders. For policymakers and regulators, the findings offer evidence to guide the design of frameworks that support healthier outcomes around investment decisions. For managers and practitioners within Selected Commercial Banks in Nigeria, the study provides practical insight into how non-performing loans can be better managed. Finally, it contributes to the academic literature on finance / banking by extending existing knowledge into a specific empirical context, and offers a reference point for future researchers.

1.6 Scope of the Study

In terms of scope, this BSc study confines itself to Selected Commercial Banks in Nigeria, focusing specifically on how non-performing loans relates to investment decisions within that setting. Findings are interpreted within these boundaries rather than as universal claims applicable to every organization or market.