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CREDIT RISK AND THE PERFORMANCE OF NIGERIAN BANKS
ABSTRACT
Recently banks witnessed rising non-performing credit portfolios and these significantly contributed to financial distress in the banking sector. Banks collect deposits and lends to customers but when customers fail to meet their obligations problems such as non-performing loans arise. This study evaluates the impact of credit risk on the profitability of Nigerian banks. Financial ratios as measures of bank performance and credit risk were the data collected from secondary sources mainly the annual reports and accounts of sampled banks from 2004 – 2008. Descriptive, correlation and regression techniques were used in the analysis. The findings revealed that credit risk management has a significant impact on the profitability of Nigeria banks. Therefore, management need to be cautious in setting up a credit policy that might not negatively affects profitability and also they need to know how credit policy affects the operation of their banks to ensure judicious utilization of deposits.
Keywords: Credit Risk, Profitability, Loan and Advances, Non-performing Loan and Total Deposits