Submit your papers Submit Now
International Peer-Reviewed Journal
For Enquiries: editor@iiardjournals.org
📄 Download Paper

Impact of Credit Risk on the Performance of Deposit Money Banks in Nigeria (1994-2024)

JOLAIYA, Olatubosun Felix Ph.D

Abstract

This study examined the impact of credit risk on the performance of deposit money banks in Nigeria from 1994 to 2024. This study sought to achieve the following objectives; to examine the impact of nonperforming loan on total asset of deposit money banks performance in Nigeria, to examine the impact of loan loss provision on total asset of deposit money banks performance in Nigeria, and to examine the impact of loan and advance on total asset of deposit money banks performance in Nigeria for a period of 31 years spanning from 1994 to 2024. The study adopted the ex-post facto research design to take into account the trends in the time series data set. Annual data were obtained from CBN statistical bulletin and NDIC data base for the period of the study. The ordinary least square (OLS) Model was used to analyze the data. The findings of the study revealed that, Nonperforming loans do not have significant positive effect on the performance of deposit money banks in Nigeria. Whereas, Loan loss provision, and Loan and advance has positive and significant effect on the performance of deposit money banks in Nigeria. Based on the findings, it was recommended that, The Central Banks of Nigeria (CBN) as the major regulatory authority of the Deposit Money Banks (DMBs) in Nigeria should formulate policies that would help to reduce the incidence of high proportion of nonperforming loans among deposit money banks in Nigeria thus effectively reducing exposure to credit risk. Also, Deposit Money Banks should ensure that they make adequate provision for loan loss and bad debt when they occur. This is so because frequent occurrence of the incidence of loan loss and bad debt can lead to bank failure.

Keywords

Credit risk Nonperforming loan Loan loss provision Loan and advances Performance of Deposit money banks

References

Adeusi, S. O., Akosile, M. O., & Ogunsanwo, O. F.(2023) The Effects of Credit Risk Management on the Deposit Money Bank’s Performance in Nigeria. Nigerian Journal of Banking and Financial Issues (NJBFI), 9(1), 9-19. Ajao, M. G & Oseyomon, E. P. (2019) Credit Risk Management and Performance of Deposit Money Banks in Nigeria. African Review of Economics and Finance, 11(1), 178-198. Aliyu, F.A, Abdullah, M. & Gugong, B.K. (2024). Credit Risk and Financial Performance of Listed Deposit Money Banks in Nigeria. UNIZIK Journal of Marketing, 1(4), 77-89. Apochi, J.G & Baffa, A.M. (2022). Credit Risk and Financial Performance of Deposit Money Banks in Nigeria: Moderating Role of Risk Management Committee. European Journal of Accounting, Auditing and Finance Research, 10(10), 98-115. Apochi, J.G & Baffa, A.M. (2022). Credit Risk and Financial Performance of Deposit Money Banks in Nigeria: Moderating Role of Risk Management Committee. European Journal of Accounting, Auditing and Finance Research, 10(10), 98-115. Asllanaj R. (2018) Does Credit Risk Management Affect the Financial Performance of Commercial Banks in Kosovo? International Journal of Finance & Banking Studies, 7(2), 49-75. Baldwin C. Y., & Scott P. M. (1983) The Resolution of Claims in Financial Distress: The Case of Massey Ferguson. The Journal of Finance, 38(2), 505-516. Basel Committee on Banking Supervision. (1999). Credit risk management: principles for themanagement of credit risk.Basel, Switzerland, 43. Bencharles, O.K & Nwankwo, D.C. (2021). Credit Risk Management and Deposit Money Banks Stability in Nigeria: Does Good Corporate Governance Matter? Research Journal of Finance and Accounting, 12(16), 1 – 14. Bouchirika, I. (2023). Types of research design: design perspective and methodological approaches. Research. https:// research.com.research/type-of0research-design. Edor, B. O. (2023). Effects of Risk Management on Financial Performance of Deposit Money Banks in Nigeria. Bingham University Journal of Accounting and Business (BUJAB), 2(5), 179 – 189. Erhabor, O.J & Ofiafoh, E. (2020). Credit Risk and The Performance of Deposit Money Banks in Nigeria. Accounting and Taxation Review 4 (1), 46 - 62. Gana, U., Tijjani, M. S. & Salisu A. (2022). Effect of Credit Risk on Financial Performance of Listed Deposit Money Banks in Nigeria. Gusau International Journal of Management and Social Sciences, Federal University, Gusau, 5(1), 49 – 65. Greuning, H., &Iqbal, Z. (2016). Banking and Risk Environment in Finance: The Regulatory Challenge. International Journal of Business and Accounting, 1(3), 35-45. Ikpe, M.E & Ekwere R. E. (2021). Credit Risk and Performance of Banks in Nigeria. International Journal of Research in Finance and Management, 5(1): 16-24. Kankpang, A. K., Lawal, S. G., & Uklala, A. P. (2023). Credit Risk and Profitability of Deposit Money Banks in Nigeria. Nigerian Journal of Management Sciences, 24(1), 177 – 187. Kwashie, A. A., Baidoo, S. T., & Ayesu, E. K.(2022) Investigating the Impact of Credit Risk On Financial Performance of Commercial Banks in Ghana. Cogent Economics & Finance, 10(1), 1-15. Malik, D. & Shafie, F. (2021). Effect of Credit Risk on Financial Performance of Deposit Money Banks in Nigeria. International Journals of Accounting and Economics, 3(6), 23-34. Natufe, O. K., & Evbayiro-Osagie, E. I. (2023) Credit Risk Management and the Financial Performance of Deposit Money Banks. Journal of Risk and Financial Management, 2(4), 4-23. Olaoye, F. O., & Fajuyagbe, S. B. (2020) Credit Risk Management and Profitability of Selected Deposit Money Banks in Nigeria. Journal of Accounting and Management, 10(3), 166- Omorokunwa O. G. & Ogbeide E. A. (2022). Credit Risk Management and Deposit Money Bank Performance in Nigeria. Accounting Practices, Financial and Sustainability Reporting, 4(7), 1 – 8. Owojori, A. A., Akintoye, R. I., & Adidu, A. F. (2011). The Challenge of Risk Management in Nigerian Banks in The Post Consolidation Era. Journal of Accounting and Taxation, 13(2), 23-31. Terseer, W., Henry, Y., & Mkuma, Y. (2020), Effect of liquidity management on the financial performance of banks in Nigeria, European Journal of Business and Innovation Research, 8(4), 30-44. Wruck, K. (1990). Financial distress, reorganization, and organizational efficiency. Journal of Financial Economics, 27(1), 419–44.

About IIARD +

Journals +

Editorial Board +

Author Guidelines +

Publication Ethics +

Policies +

More +

Creative Commons License

This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License

© 2025 IIARD. All rights reserved.