Effect of Credit Management on Profitability of Deposit Money Banks in Nigeria
Abstract
The study examined the nexus between credit management and profitability (ROA) of Deposit Money Banks (DMBs) in Nigeria context for the period of 2006 to 2015. Secondary data were sourced from Central Bank of Nigeria Statistical Bulletins and the Annual Reports of all the existing DMBs studied. The study employed multiple regression technique in analyzing the data that gathered, the analysis was done using ordinary least square with E-View 9 Econometric tool. The study found that loans and advances and loan loss provision have positive and insignificant effect on profitability, while non-performing loan has a negative and insignificant effect on profitability. The overall estimates of the two regressions have good fit and are adequate statistically. The R2squared which measures the overall goodness of fit of the entire regression shows the value of 84% and 79% in models one and two respectively. While the Durbin Waston statistic with value of 2.808450 and 2.499545 shows that there is no auto correlation among the considered variables and the overall regression is statistically significant. Thus, the study concluded that sound credit management heightens profitability and holds the financial strength of the DMBs. It was recommended that DMBs should put in place sound credit management policies and practice. Issue recoverable loan and advances and provide for loan losses for desired credit risk exposure and increased profitability.
Keywords
Credit Management
Loan Losses
Profitability
Deposit Money Banks
References
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