Credit Risk Management and Deposit Money Banks’ Performance in Nigeria

Abstract

This study examined the relationship between credit risk management and performance of deposit money banks in Nigeria. It was mainly conceived to unravel the causes of the incessant loan delinquencies and its resultant effect on the performance of deposit money banks in Nigeria, despite the various credit policies used by the monetary authorities to curtail them. To achieve this study, data for empirical analysis were sourced from the Nigerian deposit insurance cooperation spanning from 1990 to 2020. Error Correction Mechanism was employed to estimate the various models specified. It was found among others that non-performing loans (credit risks) exert significant impact on bank performance within the period of the study, while average liquidity ratio insignificantly relates to bank performance within same period. In the light of the above findings, the researchers recommend among others that the monetary authorities should intensify their regulatory as well as their supervisory role as it concerns the reduction of the volume of bad loans granted by banking system in Nigeria. Also, that deposit money banks should adopt a workable credit policy to forestall delinquent loans.

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