CREDIT RISK AND COMMERCIAL BANKS’ PERFORMANCE IN NIGERIA

Abstract

Credit risk has remained a subject of intense debate, especially since the recent global financial crisis. Thus, this study empirically examined the effects of credit risk management on the performance of commercial banks in Nigeria. The study relied on secondary data sourced from the audited annual reports and account of the relevant sampled commercial banks, NSE Fact Book 2017 and CBN Statistical bulletin 2017. The dependent variable in this study include Return On Asset and Tobin Q. While the independent or explanatory variables are Non-performing loan, loan loss provision, bad loan written off, loan to deposit ratio and equity to asset ratio. The study employed the regression model to analyze data from banks listed in Nigeria Stock Exchange for the period 2010 – 2017. The study reveals that nonperforming loans and have a significant negative effect (-0.218) on the performance of banks in Nigeria with ROA as proxy for bank performance. the study therefore recommends that Nigerian commercial banks should improve their credit risk system that allows the operationalization of a sound credit granting process and administration. The banks should promote an efficient control, monitoring and supervision system of loans and advances.