The Effects of Credit Management on Profitability of Nigerian Banks

The Effects of Credit Management on Profitability of Nigerian Banks.

ABSTRACT  

One of the major problems confronting the Nigerian banking industry today is the increasing incidence of loan defaults and consequent loan losses which manifested on the profitability of the banks, with huge uncollectible loans and advances. This study therefore, examines the effects of loans and advances on the profitability of Nigerian banks. The methodology used in the research includes secondary sources and primary sources of data collection.

The data collected were analyzed using Correlation Coefficient, Pearson Product Moment Correlation and other statistical tools to establish trends and relationship between the variables. Furthermore, graphs were used in the interpretation of the data collected. The study found out that at 5 percent level of significant; the calculated value of z is greater than the tabulated value in most of the banks considered in the study.

Therefore, this leads to the results that there is significant effect between loans and advances and its profitability. In order words this means that there is a significant effect between the way the banks manage their credits portfolio and the profitability of the banks. 

INTRODUCTION  

In every economy, there exist facilities for the creation, custodianship and distribution of financial assets and liabilities (Mohammed, 2002). These facilities make up the financial system in any economy of which banking is a sub-sector. Banks are global phenomena, a universal institution. In fact, banks intermediate between surplus and deficit economic units, thereby, acting as machinery for the allocation for the allocation of scarce financial resources. (Mohammed, 2002).

Consequently, banks occupy a primary position in the economy as it is the fulcrum of the money market and the central nervous system of the economy. The banking industry worldwide, and in Nigeria particularly, had been witnessing a lot of structural changes. These changes are meant for the improvement of services for the betterment of it operators and for the benefit of the customers, shareholders as well as the economy at large.

In Nigeria, the business of banking has not been Stagnant, the advent of the British political and economic influence brought about the evolution of banking in Nigeria. This is as far back as the last decade of 19th Century, precisely in 1892. The first Commercial bank in Nigeria “the British African Banking Corporation (BABC)” was formed in that year (Onanuga, 1998).

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StudentsandScholarship Team.