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, P.M.B.
1115 Calabar, Cross River State
drkechi@gmail.com
Lawal, Suleiman Gbenga
Department of Banking & Finance, Faculty of Management Sciences, University of Calabar,
P.M.B. 1115 Calabar, Cross River State
suleimanlawal24@admin

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 bureaus
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.
Keywords; Return on assets, Credit risk, Capital risk, Non-performing loans, Liquidity risk.

Download Full text

Leave a Reply

Your email address will not be published.