The Impact of Credit Risk on Bank Profitability in Nigeria

• Authors: Charles Onyeiwu , Gideon Ajayi , Obumneke Muoneke B.

Abstracts

EN

This study examines the impact credit risk management has on the profitability of commercial banks in Nigeria. The main objective of this material is to show how credit risk parameters are related to the expected performance of commercial banks in Nigeria. Using the regression analysis, relationship was drawn between credit risk parameters (which include capital adequacy ratio and non-performing loan ratio) and the profitability ratio (return on average asset, in particular) of five big Nigerian banks. Mixed research methodology was adopted in that primary data were sourced via questionnaires and secondary data were used via annual report of selected banks. Regression analysis was used to analyse the data. The conclusion drawn from the data analysis shows that there is a strong relationship between credit risk parameters and returns of the bank implying that credit risk management has a strong impact on the profitability of commercial banks in Nigeria. The study recommends that banks’ capital should be matched with their total risk exposure and if there is an imbalance, new capital requirements are necessary. Insider-related interests in loan applications should be closely monitored by the regulators to ensure continuous performance of the loan facility. Also, there should be an extant profiling of loan defaulters whether individuals or corporate entities.

Keywords

EN

Credit risk; Management; GRETL; Commercial Banks; Nigeria

• Publisher: Uniwersytet Warszawski. Wydział Nauk Ekonomicznych
• Journal: Journal of Banking and Financial Economics
• Year: 2020
• Issue: 1(13)
• Pages: 5-22

Dates

published

2020

Contributors

author

Charles Onyeiwu

• University of Lagos, Akoka-Yaba, Nigeria

• https://orcid.org/0000000283086836

author

Gideon Ajayi

• University of Lagos, Akoka-Yaba, Nigeria

• https://orcid.org/0000000331139462

author

Obumneke Muoneke B.

• University of Lagos, Akoka-Yaba, Nigeria

• https://orcid.org/0000000173149832

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Identifiers

DOI

10.7172/2353-6845.jbfe.2020.1.1

Biblioteka Nauki

2046419