Credit Risk Management on the Performance of Commercial Banks in Nigeria

Prof Ime T Akpan; Ekaette Imo Etukudo

doi:10.56201/ijbfr.vol.11.no7.2025.pg207.220

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Credit Risk Management on the Performance of Commercial Banks in Nigeria

Prof Ime T Akpan, Ekaette Imo Etukudo

Abstract

This article examines the effect of credit risk management on the performance of commercial banks in Nigeria between 2009 and 2023. Using an ex-post facto research design, secondary data were obtained from the Central Bank of Nigeria (CBN) statistical bulletins and banks’ annual reports. The model employed return on assets (ROA) as a proxy for bank performance, while non-performing loans (NPLs), cash reserve ratio (CRR), and interest rate (INTR) were used as measures of credit risk. Ordinary Least Squares (OLS) regression was applied to evaluate the relationships. The results reveal that NPLs had a positive but statistically insignificant effect on ROA, while CRR also showed a positive but insignificant relationship. Conversely, interest rates exhibited a negative but insignificant impact on profitability. The joint F-test further confirmed that credit risk variables did not significantly explain variations in bank performance within the article period. These findings suggest that other structural, institutional, and macroeconomic factors play a more decisive role in shaping profitability outcomes than the credit risk indicators considered. The article concludes that while credit risk management remains a core function of banking operations, its direct influence on profitability in Nigeria is limited. It recommends strengthening credit recovery mechanisms, improving operational efficiency, enhancing corporate governance, and diversifying income streams to improve the resilience and performance of Nigerian commercial banks.

Keywords

Credit risk managementNon-performing loansCash reserve ratioInterest rate

References

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Credit Risk Management on the Performance of Commercial Banks in Nigeria

Abstract

Keywords

References

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