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 Oyo State where operating conditions differ markedly from more developed markets.

Oyo State 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

Despite a growing body of literature on non-performing loans, there remains limited consensus on the precise nature of its relationship with investment decisions, particularly within Oyo State. Many organizations continue to make decisions about non-performing loans without a clear, evidence-based understanding of how those decisions ultimately affect investment decisions. This gap between practice and empirical understanding is the central problem this study seeks to address.

1.3 Objectives of the Study

1. To examine the effect of Non-Performing Loans on investment decisions in Oyo State.
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 Oyo State?
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

Beyond its academic contribution to the field of finance / banking, this study has practical value for management teams within Oyo State seeking to understand how non-performing loans translates into measurable outcomes around investment decisions. It is equally useful to students and future researchers looking for a localized empirical reference on this relationship.

1.6 Scope of the Study

In terms of scope, this study confines itself to Oyo State, 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.