CREDIT RISK MANAGEMENT EFFECT AND PROFITABILITY OF LISTED DEPOSIT MONEY BANKS IN NIGERIA

This study empirically explored the effect of credit risk management on profitability of deposit money banks in Nigeria for the period, 2013-2023. The specific objectives of the study were to assess the effect of total loans to deposit ratio, nonperforming loans and capital adequacy ratio on the net interest margin of listed deposit money banks in Nigeria. Profitability was measured using Net interest margin (NIM). Ex-post facto research design was adopted for the study. The population of the study consist of the 14 deposit money banks listed on the Nigerian Exchange Group as at December, 21, 2023, where 12 listed deposit money banks were sampled for the study. Descriptive statistics was used to summarize the collected data while Panel regression technique was adopted in investigating the effect of credit risk management on profitability of listed deposit money banks in Nigeria 5% level of significance using STATA 15 software. The study found that total loans to deposit ratio has positive significant effect on the net interest margin of listed deposit money banks in Nigeria (p-value = 0.000< 0.05). Secondly, nonperforming loans ratio has positive significant effect on the net interest margin of listed deposit money banks in Nigeria (p-value = 0.047< 0.05). Lastly, the study found that capital adequacy ratio has negative significant effect on the net interest margin of listed deposit money banks in Nigeria (p-value = 0.000< 0.05). The study concluded that banks that comply with credit risk policies have a minimum risk exposure since their credit quality is high. The study recommended amongst others that regulatory policy requirements on non-performing loan should be maintained and deposit money banks should constantly review the credit risk control policies to ensure that every credit granted has a minimum risk on default.