EFFECT OF CREDIT RISK MANAGEMENT PRACTICES ON FINANCIAL STABILITY OF DEPOSIT MONEY BANKS IN NIGERIA
Bob-ManueL, John Mandilas
Volume 4 Issue 2
Abstract
This study investigates the effect of credit risk management practices on the financial stability of deposit money banks in Nigeria. The specific objectives are to examine the effect of non-performing loans on loans and advances, total loans and advances on total deposits, and loans and advances on total assets on the financial stability of listed deposit money banks in the Nigerian banking sector between 2018-2022. This study used a quantitative research approach; data was extracted from the annual report of the listed deposit money banks in Nigeria. The data was analyzed using multiple linear regression with the aid of STATA 17. Regression analysis was conducted using the variables non-performing loans to loans and advances, total loans and advances to total deposits, and loans and advances to total assets as independent variables, representing different credit risk management practices. The dependent variable is financial stability. The findings reveal that the influence of credit risk management practices varies across the different variables. The ratio of non-performing loans to loans and advances does not statistically impact financial stability. However, the ratio of loans and advances to total deposits and the ratio of loans and advances to total assets have significant positive effects on financial stability. These results provide recommendations to enhance credit risk management practices in Nigerian deposit money banks. Continuous monitoring, regular stress testing, and robust risk governance structures are essential to effective credit risk management practices. Keywords: Credit Risk, Management, Financial Stability, Money, Bank
Download Paper