Nigerian Journal of Banking and Financial Issues (NJBFI)

Impact Of Lending Management On The Performance Of Deposit Banks In Nigeria

Abstract

The study investigated the impact of lending management on the performance of deposit money banks in Nigeria, using sectional data for 18 years from 2005 to 2022, the data used were non-performing loans ratio; loan to deposit ratio; loan loss provision ratio and bank lending rate (Independent) and profit after tax (Dependent) which was obtained from the financial statement of the sampled deposit money banks which includes: First Bank Plc; Wema Bank, Zenith Bank, GTB and UBA Plc. Pooled regression analysis of the ordinary least square (OLS) was used to estimate the determinants of the performance function. The result showed that the fixed effect results revealed that bank lending rate (BLR) and loan loss provision ratio (LLPR) have a negative insignificant impact on log of profit after tax (InPAT) going by the coefficient value of -0.059927 and -0.008279 and prob-value of 0.5925 and 0.8584 respectively. It was therefore concluded that banks should always ensure proper credit evaluation of potential borrowers before funds is allocated to prime borrowers. This should be done by collaborating with top quality credit rating firms. The study recommended that banks must put in place sound credit management process, strictly hold to know your customer (KYC) system, applying effective measures in measuring and monitoring of granted credit and ensure effective controls over credit risk.