CREDIT RISK MANAGEMENT AND RETURN ON ASSETS OF DEPOSIT MONEY BANKS IN NIGERIA

Sira Badey Igbedion
Doctoral Student
Rivers State University
seigbedion@yahoo.com
+2348033218385

Abstract:

This study is carried out to investigate credit risk management and its effect on the return on assets of Nigerian deposit money banks using secondary data from the Central Bank of Nigeria Statistical Bulletin and the Nigerian Stock Exchange fact book over the period of 1980 to 2014. To achieve stability and profitability, banks need to prioritise credit risk management, which will lead to a stronger financial sector and economy. A multiple regression model was employed to evaluate the relationship between the variables and a mixed result was generated. It was revealed from the study that there is a positive and insignificant relationship between the ratio of non-performing loans to loans and advances, ratio of performing loans to total loans and advances and ratio of total loans and advances to total deposits and the return on assets, but a negative and insignificant relationship exists between the ratio of loan loss provisioning to loans and advances and return on assets. It was recommended that banks should develop credit measures and frameworks to reduce bad loans while interest rates should be reviewed by the government to attract depositors. There should also be enlightenment programs to increase the knowledge of customers on credit and appropriate investment opportunities.

Keywords: Credit Risk, Return on Assets, non-performing loans, Loan loss provisioning

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