The Effect of Credit Management on the Performance of Commercial Banks in Nigeria
– The Effect of Credit Management on the Performance of Commercial Banks in Nigeria –
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Background to the study
The Nigerian banking industry is one sectors of the Nigerian economy, whose services are ever needed by individuals and corporate organizations. One of the key players in this industry is the commercial banks.
The popularity of commercial banks is not because they are the only legally or commercially recognized intermediary in the system but because of their branch network, large customer base and the ease with which people transact business with them.(Afolabi , 1991)
The intermediary role of the commercial banks culminates in the extension of credit facilities such as loans/advances and investments through which they make funds available for individuals and corporate organizations.
With this single function commercial banks help increase the level of economic activities in the society. The contribution of credit facilities by the banking sector towards achieving economic growth and development in Nigeria in general and Makurdi in particular cannot be overemphasized.
Credit facility plays a crucial role to the survival of any business organization. The growth and development of every nation starts when the domestic needs are satisfied.
Such needs include food security, shelter, and education and reduced unemployment rate. The banks through their services contribute immensely toward achieving these needs.
The success or failure of a bank by and large depends greatly on its ability to grant credit facilities and make substantial profits from them.
For most people therefore, commercial banks lending represent the heart of the industry. Loans dominate banks asset holding and generate the largest share of their operating income.
Loan department/ officers are among the most visible, while loan policies typically determine how fast a community develops and what types of business spring up. The greatest challenge to the banks today is granting profitable loans at reasonable risks in the face of intense competition.(Olalusi, 1999).
It is a known fact that not all credit facilities provided by banks are collected back. Many banks in Nigeria have been liquidated as a result of bad debts.
The current state of our economy is a pointer to the fact that banks need to improve on their services as it relates to bridging the gap between the surplus and deficit units of the economy.
Thus, a good management scheme will help to reduce the amounts which may be lost as bad debts and also in the collection process and period. (Nnanna , 2001)
Statement of the Problem
Financial institutions particularly the banking sector plays a vital role in the economy of any nation. To achieve the economic objectives of any nation there must therefore be empowerment of the citizens and corporate organizations in the country by enhancing their access to factors of production especially credit facilities.
This is the catalyst of stimulating sustainable economic growth and development.
With access to credit the capacity of small scale industries and corporate organizations to operate optimally would be enhanced hereby providing the teeming population with employment opportunities, enhancing household incomes and creating wealth (soludo, 2004).
The role of credit extension by the commercial banks has been impaired to some extent due to some fundamental problems in Nigeria at large and Makurdi in particular.
The sacking and replacement of some banks executives by erstwhile CBN Governor, Sanusi Lamido Sanusi is a pointer to the fact that all is not well with commercial banks credit policy management.
A review of the financial statement of commercial banks over the years shows that the huge amounts of money that are always written off as bad debts each year has been on the increase.
Maybe, it is because commercial banks extend credits to the wrong people or that they don’t do enough in terms of collection efforts (Central bank of Nigeria (Sanusi Lamido Sanusi 2010) report presented to the CBN board.
In this regards, perhaps it is timely to observe here that the fact that there is an increase in the number of commercial banks branches in Makurdi, yet most small scale and even big time business and organizations are having difficult times in accessing credit facilities.
REFERENCES
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Afolabi, L (1999): Monetary economics, Revised edition. Printed by intee printers ltd Ibadan.
Akyezuilo, U (1993): A practical guide to research project presentation; 2nd edition, University printing press, Nsukka.
Al-Faki “Recapitalization of the banking and insurance sectors: what prospect for investors and Nigeria” A quarterly of the securities and exchange commission, Nigeria.(July-September, 2005).
Bexley , J.B. (1978): Banking management, A guide to more profitable banking, Golf publishing company, Houston, Texas USA
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Broad street journal “The big cash: How saleable is Nigeria “ Edition 40/October 6, 2008.
Broad Street Journal” credit crunch hits economy” edition 43/October 27, 2008
