CREDIT MANAGEMENT AND INCIDENCE OF BAD DEBTS IN NIGERIA COMMERCIAL BANKS

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CREDIT MANAGEMENT AND INCIDENCE OF BAD DEBTS IN NIGERIA COMMERCIAL BANKS

ABSTRACT OF CREDIT MANAGEMENT AND BAD Debt INCIDENCE IN NIGERIA COMMERCIAL BANKS
The goal of this study was to establish the credit management level and the incidence of bad debts in Nigerian commercial banks. In the normal process of lending banks, load debts are included, which are offset against the income generated by the cause for bad and questionable debts.

A simple examination of most commercial banks’ annual statements reveals that they provide for bad debt more than other institutions.

This feature may also be reflected in the banks’ elative performance. Indeed, many commercial banks in this nation, particularly those owned by the government, are on the point of failure.

CHAPTER ONE

INTRODUCTION

BACKGROUND OF THE STUDY

The economic aim of a bank is to operate as a financial intermediary. It facilitates the process of channelling savings into investment, and one method of achieving this goal is through effective lending. Lending is regarded effective if it successfully reconciles with the bank’s objective to maximise depositor liquidity and shareholder profits. It entails an environmental examination of the bank’s aims, resource possibilities, and economic restrictions.

The flow of resources and potentials in the economy, as well as the government, necessitate a full assessment of the situation, which includes an examination of the financial statements, an examination of the security to be supplied, and an examination of management competency in particular.

Lending necessitates the formulation of a defined loan policy. Strong department organisation, loan review programme, and thorough credit files are just a few examples. In light of the foregoing,

a bank is obligated to its shareholders and recognises that the interest accruable on advances constitutes the majority of the bank’s yearly revenue announced, given that banks lend to meet the needs of the economy in general.

They should be considered religious commandments rather than merely tactics and suggestions with significant limitations. Political intervention may contradict the policy guidelines.

It was proposed from the start, among other things, that state-owned commercial banks be effectively managed. Banks should engage the services of external consultants/professionals to monitor and collect debts on dubious accounts and to avoid the diversion of cash through some borrowing.

The bank should make every effort to interact directly with the borrowers’ contractors or suppliers, as the case may be. Although much of the occurrence of bad debts cannot be completely prevented, it is hoped that the suggestions given in this treatise would significantly lessen its recurrence.

However, in the normal course of loan, bankers are necessarily uncollectible and so charge against the income earned with the evident serious concerns of decreasing profit and, in some extreme cases, liquidates the afflicted bank. Unfortunately, all businesses incur bad debt, but bankers, whose stock in trade is money, view debt incidents with dread.

1.2 STATEMENT OF THE PROBLEM

i. The Central Bank of Nigeria closed down an African continental bank due to a high incidence of bad debts caused by inefficiency and dishonesty among bank employees.

ii. As a result of this terrible trend in the Nigerian banking industry, bank creditors have lost their money and dividends as bad debts.

Conflicts between board members and management banks, or between board members and management. This resulted in the depletion of bank resources and the entrenchment of adversarial operating parties.

iv. African continental bank was also closed down due to questionable indebtedness, which gave rise to fraud and other unethical practises, as the most dominating element responsible for its demise. It is frequently attributed to the extremely high frequency of bad debts and loan losses. This could be considered fraud and unprofessional behaviour.

v. Inadequate internal control Most operational issues are symptoms of poor quality management. In banking, as in most cases of economic end eave fraud, management quality frequently makes the difference between success and failure.

1.3 OBJECTIVES AND PURPOSES OF THE STUDY

1. The goal of this study is to objectively examine the prevalence of bad debt in our banking sector.

2. The management of credit in Nigerian commercial banks.

3. The impact on commercial bank growth and profitability in the search for

4. A long-term solution to the recurring recurrence of bad debts in Nigerian commercial banks.

1.4 THE SIGNIFICANCE OF THE STUDY

A thorough bank inquiry will be conducted on the lending issued that led to the collapse of the African continental bank in the research. The relevance of the study is under come in its desire to assist banks confirm the multifarious help about and account operation through the flagging position of his account, account could be easily.

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