Assessing the Impact of Credit Risk Management on Performance of Deposit Money banks in Nigeria
DOI:
https://doi.org/10.61143/umyu-jafr.6(1)2024.003Keywords:
ROA, Credit Risk Management, Reform, Fixed/Random EffectAbstract
The banking sector is a major driver of economic prosperity, and this has stimulated the implementation of many reforms over time, aimed at enhancing the system's efficiency and bolstering its capacity for expansion. Although these steps have been implemented, the Nigerian banking system still faces challenges in terms of poor credit management and an increase in non-performing loans. This study, therefore, investigated the effect of reforms and credit management on the performance of deposit money banks in Nigeria. The study's population comprised all deposit money banks that were listed on the Nigeria Exchange Limited as of December 31st, 2023. The study utilised secondary data obtained from the audited reports of the selected banks and the Nigeria Exchange Limited factbook, spanning a duration of 14 years (2010-2023). The estimation approach used was the fixed and random effect regression. The findings indicated all variables employed for measuring credit risk management have a significant effect on financial performance deposit money banks in Nigeria. For the operational performance, all the variables except LATD have a significant effect on operational performance of banks in Nigeria. Also, the findings indicated that reform(s) is a significant driver of bank performance in Nigeria. Therefore, the study concluded that credit risk management plays a crucial role in influencing the performance of banks in Nigeria. Consequently, the study, therefore, recommended that Nigerian banks credit risk management should be well entrenched in banks risk management and assessment because of its ability to influence bank performance. Furthermore, it is imperative for regulatory authorities such as the CBN to regularly undertake reforms aimed at enhancing the resilience of the banking industry and enhancing its overall performance.
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