FINANCIAL RISK MANAGEMENT PRACTICES AND FINANCIAL PERFORMANCE OF DEPOSIT MONEY BANKS IN NIGERIA
Adze Musa Akudu
Volume 7 Issue 1
Abstract
This study aims to assess the effect of financial risk management practices on the financial performance of deposit money banks quoted on the Nigerian Stock Exchange (NSE) for the period 2014-2018. Secondary data was obtained from annual financial reports of a sample of 10deposit money banks. Financial risk management practices are proxy by loans and advances ratio as a measure of credit risk, liquidity ratio as a measure of liquidity risk and cost to income ratio as a measure of operational risk, while return on assets as a measure of financial performance. Panel regression technique was used for data analysis. The findings show that credit risk has significant positive effect on financial performance, while operational risk also has significant negative effect on the financial performance of banks in Nigeria. However, liquidity risk has insignificant effect on financial performance of deposit money banks. The study therefore recommends that management of deposit money banks in Nigeria should ensure that the banks’ formulated policies and laid down procedures for appraisal and approval of credit facilities are strictly followed and applied by credit officers. Management should also ensure effective and efficient management of the banks liquid and current assets. The central bank of Nigeria and other relevant agencies should make economic and financial policies that would facilitate the factors enhancing the profitability of deposit money banks in Nigeria.
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