CREDIT RISK AND PROFITABILITY OF DEPOSIT MONEY BANKS IN NIGERIA

KANKPANG, Alphonsus Kechi
Department of Accounting
Faculty of Management Sciences
University of Calabar, Cross River State
drkechi@gmail.com
LAWAL, Suleiman Gbenga
Department of Accounting
Faculty of Management Sciences
University of Calabar, Cross River State
suleimanlawal24@gmail.com
UKLALA, Ashishie P.
Department of Accounting
Faculty of Management Sciences
University of Calabar, Cross River State
ABSTRACT
Failure of banks in Nigeria’s banking industry prior to the consolidation era were as a result of financial
deepening that led to bad loans and other unethical factors that orchestrated financial stability. This
study examined credit risk and profitability of deposit money banks in Nigeria. The study adopted ex-post
facto research design and used secondary data sourced from Central Bank of Nigeria’s statistical bulletin
and Nigeria’s bureaus of statistics. Ordinary least square of multiple regression techniques was used to
test the relationship between proxies of credit risk (liquidity risk and non-performing loans) and
profitability. The study found the existence of significant influence of liquidity risk and non-performing
loans on profitability of deposit money banks in Nigeria. The study therefore concluded that credit risk in
terms of liquidity risk and non-performing loans influence profitability of deposit money banks in
Nigeria; and recommends that operators of deposit money banks should pay adequate attention to
liquidity risk and non-performing loans management in order to improve their profitability and ensure
financial stability to promote economic growth and development.
Keywords: credit risk, liquidity risk, non-performing loans, profitability