Vol 1, No 2 (2013)
Credit Management Spur Higher Profitability? Evidence from Nigerian Banking Sector
Taiwo Adewale Muritala, Abayomi Samuel Taiwo
Abstract
The rising non-performing credit portfolios have significantly contributed to financial distress in the banking sector. Banks collect deposits and lends to customers but when customers fail to meet their obligations problems such as non-performing loans arise. This study evaluates the impact of credit risk management on bank profitability of some selected commercial banks in Nigeria using econometric analysis method on annual time series data of ten banks over the period of 2006 to 2012. The results from Levin, Lin & Chu unit root test shows that all the variables were non-stationary at level. The results from Panel Least Square (PLS) estimate found that that credit risk management has a significant impact on the profitability of Nigeria banks. Therefore, management need to be cautious in setting up a credit policy that might not negatively affects profitability and also they need to know how credit policy affects the operation of their banks to ensure judicious utilization of deposits. This conclusion has important policy implications for emerging countries like Nigeria as it suggests that capitalisation and total assets of the bank should be periodically evaluated. The regulatory authorities will therefore need to put in place appropriate machinery that will address issues of bank liquidity and shore assets quality in the industry.
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Keywords
Credit Risk; Profitability; Non-Performance Loan; Loan & Advances
Publication information
Volume 1, Issue 2
Year of Publication: 2013
ISSN: 1857 - 8721
Publisher: EDNOTERA
How to cite
Taiwo Adewale M., Abayomi Samuel T.: Credit Management Spur Higher Profitability? Evidence from Nigerian Banking Sector. Journal of Applied Economics and Business, Vol 1, No. 2, 46-53. (2013)