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ABSTRACT
The study examined the effect of credit risk on the performance of financial institutions in Nigeria with focus on Deposit Money Banks (DMBs). The broad objective of the study was to ascertain the effect of risk asset management on the optimal performance of Deposit Money Banks in Nigeria. The specific objectives are to determine: the relationship between a Deposit Money Bank’s credit risk and its liquidity; the extent of the relationship between a Deposit Money Bank’s credit risk and its profitability; the relationship between a Deposit Money Bank’s credit risk and its efficiency; and the relationship between a Deposit Money Bank’s credit risk and its leverage in Nigeria.
The research was a longitudinal study. Financial performance indicators of banks and secondary data were used. Arising from the model specification, ordinary least squares was used in analyzing the research data. Specifically, the Generalized Regression Estimation Technique (Greti) software was used.
Theresearchfindings showed that; credit risk is significantly related to liquidity, profitability and efficiency of banks. It is recommended that banks should take decisive steps at measuring and controlling credit risks through effective credit management as well as ensuring that the financial performance of the banks is not jeopardized.
