Credit management mechanisms and performance of listed deposit money banks in Nigerian

Abstract

Banking industry has played an integral role in mobilizing funds from areas of surpluses to places of deficits so as to bolster growth in the economy. However, banks collapse in Nigeria has become a worrisome phenomena because of the significant roles of banks in financial intermediation. These collapses are a result of ineffective credit management system that has led to the inability of banks to retrieve loan funds as at when due, thus staining the little liquidity left. This motivation necessitated examination of credit management mechanisms in quoted banks on the floor of Nigerian Exchange Group, spanning a decade, from 2013 to 2022. Correlational and ex-post facto design were used for the sets of secondary data. Net interest margin was a proxy for financial performance while the explanatory variables were proxy with; asset quality, credit risk and liquidity risk. The random effect regression result showed that, liquidity risk had negative and significant effect on financial performance of quoted banks on the floor of Nigerian Exchange Group. This showed that, the higher the liquidity risk, the lower the performance level recorded by quoted banks on the floor of Nigerian Exchange Group. Asset quality and credit risk had negative but insignificant effect on the financial performance of quoted banks on the floor of Nigerian Exchange Group. Therefore, the study recommended that, to mitigate financial failure, quoted banks on the floor of Nigerian Exchange Group should ensure lower liquidity risk.