THE IMPACT OF CREDIT RISK ON DEPOSIT MONEY BANKS PERFORMANCE IN NIGERIA

ABSTRACT

The broad objective of this study is to examine the impact of credit risk on deposit money banks performance in Nigeria. To guide the study, five research questions were raised and five hypotheses were formulated and tested. The data for this study were obtained from secondary sources. The data were compiled from various issues of the Central Bank of Nigeria publications. The method used in analyzing the impact of credit risk on deposit money banks performance in Nigeria on annual time series data from 1989 to 2016 on Loan and Advances (LAA), Credit to Private Sector (CPS), Lending Interest Rate (LIR), Savings and Time Deposit (STD) Non-Performing Loan (NPL) and Return on Assets (ROA) as proxy for its impact on Nigeria economy collected from Central Bank of Nigeria Statistical Bulletin (2017) was the Ordinary Least Squares multiple regression technique. Phillips-Perron statistic was employed to determine the stationarity test. Statistical theory requires that variables be stationary before application of standard econometric techniques. This was done in order to avoid spurious (misleading) results. Based on the findings from the study, the study recommended among others thatsince risk management in general has very significant contribution to bank performance, the banks are advised to put more emphasis on risk management,by reducing risk on loans and achieve maximum performance.The banks need to allocate more funds to default rate management and try to maintain just optimum level of capital adequacy