Effects of Credit Management Techniques on the Performance of Selected Commercial Banks in Nigeria: A Study of First Bank PLC

Abstract

Effective credit management is a basic for an institution in financial sector performance. With declining performance of the institutions due to increasing competition and changing regulatory framework, credit quality is imperative for continued wellbeing of the institutions in terms of financial performance. Deposit money banks (DMBs) in Nigeria create loans from deposits from customers and these loans are major income generating source for majority of the banks.' However, this intermediation function of DMBs in Nigeria is associated with enormous risks t both the banks and the deficit units. It is thus imperative for this study to examine the effect of credit management on the profitability of deposit money banks in Nigeria using first bank in FCT, Abuja as a study. Historical research design was adopted. Descriptive study design was adopted for this study; while the questionnaire employed contained closed-ended structured questions in a five-Likert scale format. Regression technique was used for tire estimation of data generated through the structured questionnaire. Findings from the study showed that clier.' ’appiaisal have a significant effect on profitability’ of deposit money banks in Nigeria. Mote so, the study showed that ci edit risk control has a significant effect on profitability of deposit money banks in Nigeria; and coEection policy has a significant effect on profitability of deposit money ' banks in-Nigeria Based on’ these findings, the study recommends that there is need for commercial banks in Nigeria to enhance their client appraisal techniques so as to improve llici: financial performance. Through client appraisal techniques, the commercial banks in Nigeria will be able to know credit worthiness of clients and thus reduce non-performing loans Theie is also need for commercial banks in Nigeria to enhance their credit risk control. This may help in decreasing loan default levels. As regards to credit policy, the bank should also emphasize on collateral and ‘the use of tile reminders, insurance policy and the litigation to minimize costs resulting from investing in vulnerable clients and maximize returns