Impact of Credit Risk Management on the Performance of Nigerian Deposit Money Banks: An Analysis from 2010 to 2020

Abstract

This study examined the impact of credit risk management on the financial performance of Nigerian deposit money banks over a 10-year period from 2010 to 2020. Understanding the relationship between credit risk management and bank performance is crucial for the stability and growth of the Nigerian banking sector. The Five deposit money banks used were First Bank Plc, Zenith Bank Plc, Access Bank Plc, Guarantee Trust Bank Plc, with United Bank of Africa (UBA) Plc. Equity returns measured bank performance while credit risk was explained using non-performing credits, capital adequacy ratio, plus provision for credit loss. Fixed plus Random panel regression was used to analyze the panel data and the Hausman test selected the fixed regression for discussion. The findings revealed that capital adequacy ratio and loan loss provision had a significant positive impact on bank performance, while non-performing loans had a significant negative effect. The study recommends that banks should strengthen their credit risk management practices, including effective credit assessment, monitoring, and diversification, to enhance their financial performance and stability.