Critical Analysis of Credit Management in Nigeria Banks

International Journal of Research and Innovation in Social Science (IJRISS) | Volume III, Issue II, February 2019 | ISSN 2454–6186

Critical Analysis of Credit Management in Nigeria Banks

Ajugwe Chukwu Alphonsus. Ph.D

Abstract: It is noteworthy to stress that management or administration of credit is a critical task facing every bank in the world of which Nigerian banks are inclusive. Specifically, the application requires experience and in-depth knowledge of banking practice. And for its effective performance, top management must be involved because of its critical importance in the overall performance of the bank and the fact that credit administration can impact either positively or negatively on the financial position of the bank. It determines the liquidity of the bank and how solid is the capital structure as well, the combination of both is imperative to determine how healthy the bank is.
A positive lending policy will ensure a constant flow of income to the bank which will lubricates their liquidity mechanism and making it possible to meet its cash demand as and when due, remains sound and resilient, and impact positively on its profitability for the benefit of the stakeholders or shareholders. This important task is not only achieved through the intermediation functions of the bank that triggers the injection of funds to the real sector of the economy, which stimulates economic growth and development. Nevertheless to stress that negative administration of credit will lead to the accumulation of bad debts in the books of the banks, dry up their liquidity, and led to the erosion of their capital. The continuous erosion of capital will trigger the folding up of the bank or lead to a merger or simple acquisition of the weaker banks by the stronger banks; typical examples are Skybank acquired by the Polor is bank or Diamond Bank that merged with a stronger Access bank.
Therefore, this paper will critically analyze the importance of credit management by the banks, and carefully crutinize its positive and negative impacts on the financial position of the banks and the economy as a whole. And recommend major steps to be deployed by the banks to ensure good credit management that will usher in confidence in the lending policy of the banks, by enunciating steps to be taken in the administration of credits to eliminate the possibilities of the loans crystalizing into bad debts.

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