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Non-Performing Loans and Credit Risk Management in Listed Deposit Money Banks in Nigeria

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  • Amity Agi Ijuwo

    (Department of Accounting, Benue State University Makurdi Nigeria)

Abstract

The study investigates the effect of non-performing loans (NPLs) on credit risk management in listed deposit money banks in Nigeria, focusing on three banks: First Bank Nig Plc, Zenith Bank Plc, and First City Monument Bank Plc within the period of 2008 to 2022. The method of data analysis is the panel cointegrating method using fully modified ordinary least square regression analysis. The results show that the non-performing loan to deposit ratio (NPTDR) significantly impacts credit risk management, with a coefficient of -6.499415, a t-statistic of -3.208157, and a probability value of 0.0000. This indicates that changes in NPTDR have a significant long-term impact on credit risk management. Conversely, the non-performing loan ratio (NPTLR) does not significantly influence credit risk management, with a coefficient of 4.439397, a t-statistic of 0.849112, and a probability value of 0.4016. The leverage ratio (LEVRA) has a significant impact on credit risk management, with a coefficient of 35.13657, a t-statistic of 4.380698, and a probability value of 0.0001, suggesting that higher leverage ratios are associated with better credit risk management practices. Additionally, firm size (FMSZ) significantly affects credit risk management, with a coefficient of -1.283115, a t-statistic of -2.117403, and a probability value of 0.0414, indicating that larger firm sizes are linked to lower credit risk management scores. These findings underscore the importance of capital adequacy, leverage, and firm size in shaping credit risk management practices in Nigeria’s banking sector, providing valuable insights for policymakers and banking regulators to enhance the stability and resilience of the banking sector.

Suggested Citation

  • Amity Agi Ijuwo, 2024. "Non-Performing Loans and Credit Risk Management in Listed Deposit Money Banks in Nigeria," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 8(7), pages 427-443, July.
    • Handle: RePEc:bcp:journl:v:8:y:2024:i:7:p:427-443
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    References listed on IDEAS

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    1. Idowu Abiola & Awoyemi Samuel Olausi, 2014. "The Impact of Credit Risk Management on the Commercial Banks Performance in Nigeria," International Journal of Management and Sustainability, Conscientia Beam, vol. 3(5), pages 295-306.
    2. Berger, Allen N. & DeYoung, Robert, 1997. "Problem loans and cost efficiency in commercial banks," Journal of Banking & Finance, Elsevier, vol. 21(6), pages 849-870, June.
    3. Beck, Thorsten & Demirgüç-Kunt, Asli & Merrouche, Ouarda, 2013. "Islamic vs. conventional banking: Business model, efficiency and stability," Journal of Banking & Finance, Elsevier, vol. 37(2), pages 433-447.
    4. Isah Serwadda, 2018. "Impact of Credit Risk Management Systems on the Financial Performance of Commercial Banks in Uganda," Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis, Mendel University Press, vol. 66(6), pages 1627-1635.
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