Credit Risk Management and Efficiency in the Banking Industry of an Emerging Economy in Africa: Evidence from Nigerian

Credit risk management and efficiency of the banking industry
remains a debated issue in literature. Our position on this
subject matter is that credit risk affects banks’ efficiency and
distorts profitability with a resultant loss in banks’ earnings.
Momentous depreciation in banks ’ earnings would make
shareholders not to have confidence in banking operations.
This would affect banks’ capacity to mobilize idle funds from
the public which influences effective financial intermediation. A
bank may go bankrupt and possibly into merger with another
bank or have its licence revoke by regulatory authority (ies)
owing to ineffective credit risk management practice. The
finding from this study using data from 1999 to 2018 sourced
from the Central Bank of Nigeria (CBN) and Nigeria Deposit
Insurance Corporation (NDIC) revealed that credit risk
management has significant effect on efficiency of the Nigeria
banking industry. We suggest that banks should adhere strictly
to the rules that guide given of loans and advances to
customers. In addition, banks should abide by the credit risk
management guidelines as spelt out in the prudential guideline
of the Central Bank of Nigeria.