ASSESSING THE ROLE OF RISK MANAGEMENT IN ENHANCING NIGERIAN COMMERCIAL BANK PERFORMANCE

This study investigates the effect of risk management on the performance of banks in Nigeria, using return on assets (ROA) and return on equity (ROE) as performance indicators. Unsystematic risk management measures—including credit risk, liquidity risk, and operational risk, and capital adequacy risk— serve as independent variables. Data covering 23 years (1994–2016) were obtained from NDIC annual reports and analyzed using Ordinary Least Squares (OLS) regression in SPSS. Tests for multicollinearity and autocorrelation confirmed model suitability and result reliability. The findings indicate that risk management variables explain 41% and 23% of the variations in ROE and ROA, respectively. Credit risk significantly negatively affects ROE but has an insignificant negative effect on ROA. Liquidity and operational risks show no significant impact on bank performance, while capital adequacy positively affects ROE but insignificantly affects ROA. The study concludes that risk management practices in Nigerian banks are generally weak. It recommends that the Central Bank of Nigeria (CBN) and other regulators enforce comprehensive risk identification, assessment, and control mechanisms aligned with global best practices to prevent financial crises and improve commercial bank performance