CREDIT RISK MANAGEMENT AN D FINANCIAL PERFORMANCE

ABSTRACT

This study examined the effect of credit risk management on the deposit money banks (DMBs) performance in Nigeria. Credit risk management was proxied by capital adequacy ratio (CAR), Credit to deposit ratio (CDR), Nonperforming loan ratio (NPLR) and management quality ratio (MQR) while Return on Asset (ROA) was used to proxy DMBs performance. Aggregate consolidated DMBs time series data from 1981 to 2021 were obtain from the Central Bank of Nigeria (CBN) Statistical bulletin. The Ordinary Least Square (OLS) regression methodology was adopted with preliminary test of descriptive statistics, correlation analysis and Augmented Dickey Fuller (ADF) unit root test first carried out on the data. Findings shows credit risk management variables have vary degree of impact on DMBs performance. Specifically; Capital adequacy and credit to deposit ratio has significant positive influence on DMBs performance in Nigeria. Nonperforming loan has significant negative impact on DMBs performance in Nigeria; while management quality has insignificant negative effect on DMBs performance in Nigeria. From the foregoing analysis, the study concludes that credit risk management is a significant determinant of DMBs performance in Nigeria.