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2015•Unpublished venueRequires access

IMPACT OF CREDIT RISK ON THE PROFITABILITY OF SELECTED DEPOSIT MONEY BANKS IN NIGERIA

Banyigyi Nuhu Aforo, Uwaleke Uchenna Joseph

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Abstract

This study examines the impact of Credit Risk on the Profitability of selected Deposit Money Banks in Nigeria. A cross sectional panel data of two deposit money banks in Nigeria is selected and used as sample and an ordinary least square method of regression is adopted to explore the relationship between the dependent variable (ROA) and the independent variable (Credit Risk) for a period of ten years (2003-2012). The findings of the study show that there is a negative and significant relationship between Credit Risk and Profitability of banks in Nigeria. This means that profitability significantly decreases with an increase in credit risk. Hence the study recommends among others the practice of prudent credit risk management by Deposit Money Banks to safeguard their assets and protect investors’ interest.

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What this paper is about

This study examines the impact of Credit Risk on the Profitability of selected Deposit Money Banks in Nigeria. A cross sectional panel data of two deposit money banks in Nigeria is selected and used as sample and an ordinary least square method of regression is adopted to explore the relationship between the dependent variable (ROA) and the independent variable (Credit Risk) for a period of ten years (2003-2012). The findings of the study show that there is a negative and significant relationship between Credit Risk and Profitability of banks in Nigeria. This means that profitability significantly decreases with an increase in credit risk. Hence the study recommends among others the practice of prudent credit risk management by Deposit Money Banks to safeguard their assets and protect investors’ interest.

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Available abstract

This study examines the impact of Credit Risk on the Profitability of selected Deposit Money Banks in Nigeria. A cross sectional panel data of two deposit money banks in Nigeria is selected and used as sample and an ordinary least square method of regression is adopted to explore the relationship between the dependent variable (ROA) and the independent variable (Credit Risk) for a period of ten years (2003-2012). The findings of the study show that there is a negative and significant relationship between Credit Risk and Profitability of banks in Nigeria. This means that profitability significantly decreases with an increase in credit risk. Hence the study recommends among others the practice of prudent credit risk management by Deposit Money Banks to safeguard their assets and protect investors’ interest.

Key concepts: Profitability index, Credit risk, Business, Panel data, Sample (material), Financial system, Credit history, Finance

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