CREDIT MANAGEMENT AND BANK PERFORMANCE IN NIGERIA

CHAPTER ONE1.0. BACKGROUND OF THE STUDYCredit management in our banking sector today has taken a different dimension from what it used to be. The banking industry has adopted a lot of strategies in checking credit management in order to stay in business. Thus the banking industry in Nigeria has lost large amount of money as a result of the turning source of credit exposure and taken interest rate position. Nigerian banks are being required in the market   because of their competence   to provide transaction efficiency,   market knowledge and funding capability. To perform these roles, the banks act as the most important participants in their transaction process of which they use their own balance   sheet to make it   easier and making sure   that their associated risk   is absorbed. Credit extension is essential function of banks and the bank management strives to satisfy the legitimate credit needs of the community it tends to serve. This credit advances by banks as a debtor to the depositor requires exercising prudence in handling the funds of depositors. The Central Bank of Nigeria established a credit act   in   1990   which   empowered   banks   to   render   returns   to   the   credit   risk management system in respect to its entire customers with aggregate outstanding debt balance of one million naira and above (Ijaiya G.T and Abdulraheem A(2000). This made Nigerian banks to universally embark on upgrading their controlsystem and risk management because this coincidental activity is recognized as theindustry physiological weakness to financial risk. The researcher, a New yolk-based, said that 40% of Nigerian banks that made up exchange rate value in west Africa, has reduced the operating lending as a result of bad debts which hit morethan $10 billion in 2009 and this has led to a tied-up questioning asset that is holding almost half of Nigerian banks. The central bank of Nigeria fired eight chief executive officers and set aside $ 4.1 billion in order to bail out almost 10 of the country's lenders. The reform which was introduced by Central Bank of Nigeria(CBN)   in   2010   has   made   Nigerian   banks   resume   lending   supporting   asset management companies and set up the requirement which will allow Nigerian banks make full provision for bad debts that will boost the market.The banks   identify the existence of  destructive debtors in the banking system whose method involved responding to their debt obligations in some banks and tried to have contract of new debts in other banks. Banks are trying to make the database   of credit risk management system more open   for   them   to   be   morefunctional and recognized as to enable banks to enquire or render statutory returns on borrowers. There are some banking practices which increase the risks in the bank and cannot be easily changed. This result still leads to the question: what are the possible ways that will help make Nigerian banks manage their credit risks?The   banking   industry   has   been   known   for   its   intermediary   role   in   providing financial   assistance   (credit)   needed   in   the   economy.   This   role   of   financial intermediation is carried out in so many ways. First to be mentioned is the granting of loans and advances to customers which constitutes the major part of banking lending. Apart from loans and advances, other forms of bank credits like bond issued banks for and on behalf of their customers....