An Examination of Credit Risk Management Practices in Nigerian Commercial Banks: Evidence from UBA
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Background of the Study
Credit risk management is a cornerstone of effective banking, enabling financial institutions to safeguard their assets while extending credit to individuals and businesses. Nigerian commercial banks, including the United Bank for Africa (UBA), operate in an economic environment characterized by high volatility, regulatory changes, and fluctuating interest rates, all of which heighten the importance of robust credit risk practices (Olawale & Okafor, 2023).
The Central Bank of Nigeria (CBN) has implemented policies to strengthen credit risk management, yet many banks still face challenges in loan defaults and non-performing loans (NPLs). UBA, one of the largest commercial banks in Nigeria, provides a useful case study for examining the effectiveness of credit risk practices and their impact on financial stability.
Statement of the Problem
Despite regulatory measures to improve credit risk management, Nigerian banks, including UBA, continue to experience high levels of non-performing loans. This affects their profitability and ability to extend credit, thus hindering economic growth (Adeoye & Bello, 2024).
There is limited empirical research on the effectiveness of credit risk management practices in UBA and how they compare to industry standards. This study seeks to fill this gap by analyzing UBA’s credit risk practices and their implications for financial stability.
Objectives of the Study
- To evaluate the effectiveness of credit risk management practices in UBA.
- To assess the impact of credit risk management on UBA’s financial performance.
- To identify challenges in implementing effective credit risk strategies in UBA.
Research Questions
- How effective are UBA’s credit risk management practices?
- What is the impact of credit risk management on UBA’s financial performance?
- What challenges hinder the implementation of credit risk management in UBA?
Research Hypotheses
- UBA’s credit risk management practices significantly reduce non-performing loans.
- Effective credit risk management has a positive impact on UBA’s financial performance.
- Challenges in credit risk management significantly affect its implementation in UBA.
Scope and Limitations of the Study
This study focuses on UBA’s credit risk management practices between 2023 and 2025. Limitations include restricted access to proprietary data and potential variations in economic conditions during the study period.
Definitions of Terms
- Credit Risk Management: The process of identifying, assessing, and mitigating risks associated with borrowers’ inability to meet financial obligations.
- Non-Performing Loans (NPLs): Loans that are in default or close to being in default.
- Financial Performance: The financial health of a company, measured by metrics such as profitability and return on equity.
