Effect of Credit Risk Management on the Financial Performance of Deposit Money Banks in Nigeria (Published)
This study examined the effect of credit risk management on the financial performance of Deposit Money Banks in Nigeria. Specifically, it analyzes the impact of Non-Performing Loans (NPL), Loan Loss Provision (LLP), and Capital Adequacy Ratio (CAR) on Return on Assets (ROA). The study used secondary data from 2014 to 2023 and applied Panel Ordinary Least Squares (OLS) multiple regression for analysis. The findings reveal that NPL has a negative and significant effect on ROA, with a coefficient of -0.031054, a t-statistic of -2.954064, and a p-value of 0.0044. This means that an increase in NPL reduces bank profitability. LLP has a positive and significant effect on ROA, with a coefficient of 0.006245, a t-statistic of 6.092986, and a p-value of 0.0000, showing that higher loan loss provisions improve financial performance. CAR also has a positive and significant effect on ROA, with a coefficient of 0.031904, a t-statistic of 2.189893, and a p-value of 0.0321, indicating that banks with higher capital adequacy perform better. The model explains 44.44% of the variation in ROA, as shown by the R² value of 0.444412. The F-statistic of 12.99828 and its p-value of 0.000000 confirm that the overall model is statistically significant. This study contributes to knowledge by examining these three credit risk factors together, filling gaps in past research. The findings provide valuable insights for bank managers, regulators, and policymakers on how to improve bank stability and profitability through better credit risk management.
Keywords: Capital Adequacy Ratio, Credit Risk Management, Deposit Money Banks, Financial Performance, Loan Loss Provision, Non-Performing Loans, Return on Assets
Dynamic Response Analysis of Private Sector Credit Delivery to Variations in Financial Intermediation Costs in Nigeria (Published)
This study investigated the dynamic responses of private sector credit delivery in Nigeria to variations in financial intermediation costs. Ex-Post Facto research design and Panel Vector Auto Regression estimation method were used. Annual panel data for 10years were collected from individual annual reports and financial statements of the selected banks. The dependent variable in the panel data regression model was private sector credit delivery proxied as the ratio of loans and advances to total asset while the independent variables were variations in bank operating cost, loan loss provision and interest rate spread. The study found that the magnitude of the shocks-impact of private sector credit delivery in Nigeria depends on the variations in the level of bank operating costs, loan loss provision and interest rate spread. The implication of the finding is that in subsequent years in the future (3-year period), there will be absence of shocks-impact in the 1st year but there will be presence of shocks-impact of various magnitude in the 2nd and 3rd years respectively. This means that shocks on bank operating costs, loan loss provisions and interest rate spread have no long lasting effect on private sector credit delivery in Nigeria. The study recommends that efforts should be intensified to ensure that shocks in financial intermediation costs (bank operating cost, loan loss provision and interest rate spread) does not adversely affect private sector credit delivery in Nigeria.
Keywords: Bank Operating Cost, Financial Intermediation Costs, Interest Rate Spread, Loan Loss Provision