Credit risk management and performance of deposit money banks in nigeria
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- 5.3 Conclusion
| 5.2 Policy Recommendations
Based on the findings from this study, the following salient recommendations are made for policy consideration. Firstly, since capital adequacy ratio has proven to be a relevant factor in the determination of deposit money banks’ performance in Nigeria, in order to prevent cases of liquidity crunch in Nigerian banks, the Central Bank of Nigeria (CBN) should ensure strict compliance to the minimum 15% recommended threshold for banks with international authorisation and 10% for banks with either national or regional authorisation. This will go a long way to ensuring that sufficient capital are always available in banks from time to time and by so doing confidence will be sustained in the banking system and banks’ failure would be avoided. Secondly, banks’ management should be deliberate and more decisive in taking actions on erring credit officers who often compromise the credit system for their selfish gains at the detriment of the banks. Also, loans’ recovery drive should be their watch wall and this must be carried out by current state of the art strategy as it is done in the more technological advanced economies of the world. Finally, management should strictly adhere to loan’s provision guidelines and as recommended by CBN as this will go a long way to reducing adverse effect of liquidity shortage in banks and thus, prevent insolvency and bank crisis. 5.3 Conclusion The study has examined the relationship between credit risk management and performance of deposit money banks in Nigeria for a period of 9 years (2013 to 2021). Relevant credit risk management factors were regressed on banks’ performance using the fully modified ordinary least square econometric method of analysis. The results from the analysis of data revealed that capital adequacy ratio and bank size play significant roles in the determination of the overall performance of deposit money banks in Nigeria. They were found to have significant negative impact on banks’ performance overtime. The other hypothesized variables in the model such as non-performing loans, loans loss provision and loan-to-deposit-ratio failed the 5 percent significance level, as they were not relevant in the determination of deposit money banks’ performance. Thus, we conclude that CBN and banks’ management should be deliberate and more decisive in taking actions on erring credit officers who often compromise the credit system for their selfish gains at the detriment of the banks. Also, loans’ recovery drive should be their watch wall and this must be carried out by current state of the art strategy as it is done in the more technological advanced economies of the world. Download 61.14 Kb. Share with your friends:
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