Credit Risk and Its Effects on Deposit Money Banks in Nigeria

AFRAG012

Credit Risk and Its Effects on Deposit Money Banks in Nigeria

Dr. Alphonsus Kechi Kankpang Department of Accounting, Faculty of Management Sciences, University of Calabar, Calabar, Cross River State drkechi@gmail.com

Lawal, Suleiman Gbenga Department of Banking & Finance, Faculty of Management Sciences, University of Calabar, Calabar, Cross River State    suleimanlawal24@gmail.com

Abstract:

In the history of development of the Nigerian banking industry, it is evident that most of the failures experienced within the industry prior to the consolidation era were

as a result of financial deepening that finally led to bad loans and some other unethical factors and as such financial stability has generated the ever-increasing attention and interest in academic and banking sector in Nigeria. The study empirically examined credit risk and its effects on deposit money banks in Nigeria. The following objectives were determined to ascertain the effects of credit risk in deposit money banks in Nigeria; to examine the effect of liquidity risk on deposit money banks in Nigeria and to access the effects of non-performing loan on deposit money banks in Nigeria. Secondary source of data was employed from the central banks statistical bulletin and the Nigerian Bureau of Statistics. Ordinary least square of multiple regression techniques was used to establish the relationship between dependent and independent variables. This study examined the effect of credit risk management on financial stability of deposit money banks in Nigeria; specifically assessing the relationship between credit risk management and financial stability and establishing the level of credit risk measures to be put in place to ensure financial stability of deposit money banks in Nigeria. The study adopted ex- post facto research design (desk survey). The findings revealed that there exist a significant relationship between the established variables and deposit money banks in Nigeria. The study concluded that credit risk management influenced financial stability of deposit money banks in Nigeria. The study recommended that operators of deposit money banks should pay adequate attention to those variables of credit risk, liquidity risk, and non- performing loans management in order to improve financial stability by managing credit risk that deposit money banks are facing to improve financial stability and to put in place proper credit management policy to mitigate credit risk and to also improve the knowledge of credit management policy in financial institutions.

Leave a Reply

Your email address will not be published.