AN EXAMINATION OF THE EFFECT OF CREDIT RISK MANAGEMENT ON PERFORMANCE OF DEPOSIT MONEY BANKS IN NIGERIA

1SHABA, Mohammed, 2 Salami, A.O and 3Mubarak Sanni

Abstract

For a 10-year period, this study looked at the impact of credit risk management on the financial performance of Nigeria's quoted deposit money banks (2011-2020). The data for the study came from 13 deposit money institutions' annual reports and financial statements. Loan to deposit ratio, credit risk, capital adequacy risk, and solvency risk were used to measure credit risk management, while return on assets was used to measure financial performance. Statistical approaches were used for both descriptive and inferential purposes.Cross tabulations, mean, regression, and correlation analyses were used with the help of the SPSS and E-views computer programmes. Loan to deposit ratio, credit risk, and capital adequacy risk have no influence on return on assets, whereas solvency risk and company size have a positive significant effect on return on assets, according to the data. Furthermore, credit risk management has no discernible impact on financial performance (P 0.05).As a result, the study recommends that bank management create a proper credit risk environment, sound credit granting processes, appropriate credit administration, measurement, monitoring, and control over credit risk, as well as policies and strategies that clearly summarize the scope and allocation of bank credit facilities, as well as the approach in which a credit portfolio is managed. Credit risk management should also be encouraged and ingrained in Nigerian banks in order to maintain performance growth.