The Impact of Credit Risk Management Policies on the Growth of Deposit Money Banks: The Nigerian Experience

Ever Obi; Olajide Solomon FADUN; Babajide Abayomi IJIMAKINWA

doi:10.20525/ijrbs.v14i3.4161

Authors

Ever Obi Risk and Fences Limited https://orcid.org/0009-0001-8274-3662
Olajide Solomon FADUN University of Lagos https://orcid.org/0000-0003-0882-6248
Babajide Abayomi IJIMAKINWA DATIS Nigeria Limited

DOI:

https://doi.org/10.20525/ijrbs.v14i3.4161

Keywords:

Credit Risk, Risk Management, Deposit Money Banks, Nigeria, Banking

Abstract

This study examines the impacts of credit risk management on the growth of Nigerian banks. Specifically, the study focused mainly on the impacts of credit risk management among Deposit Money Banks in Nigeria. The study employed an ex-post facto research design, utilising secondary data from the financial information of 14 selected listed Deposit Money Banks from 2007 to 2022. The study population was defined as the total number of listed Deposit Money Banks, from which a sample of six banks was selected using a simple random sampling technique. The operationalisation of variables included (1) the use of natural logarithm for bank size, (2) a three-level scale for credit risk, and (3) alternative measurements for collateral management and credit scores. Data analysis involved the calculation of descriptive statistics, correlation analysis, variance inflation factors, and regression analysis. The research hypotheses are also validated to assess the significance of various factors in credit risk management. The findings revealed that credit scores significantly enhance the effectiveness of credit risk assessment, and collateral management did not significantly contribute to mitigating credit risk. The findings also revealed that default risk management significantly reduces the credit risk of Deposit Money Banks in Nigeria. These results highlight the intricate nature of credit risk management in the banking sector and emphasize the need for a multifaceted approach.

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