CREDIT MANGEMENT IN NIGERIA BANKS:
AJUGWE CHUKWU ALPHONSUS
Credit Management is one the most difficult task facing bankers all of over the world and the case is more pronounced in the Nigeria situation because going through the history of banking in Nigeria, one can observed that the major source of bank failures was ineffective credit management that led to accumulation of bad debts. Credit administration is the bane of Nigeria banks and a major source of worry to Regulatory Authorities. The Prudential guideline issued by Central Bank of Nigeria defined Credit as the aggregate of all loans ,advances, overdraft, commercial paper, bankers’ acceptances, bills, discounted, leases, guarantees, and other loss contingences connected with a bank’s credit risk. However, Mandel (1974) noted that credit is the right of lender to receive money in the future for his obligation to transfer the use of funds to another party in the interim. Credit management is the strategy applied by the management of the banks to plan, control and monitor loans and advances given to their customers to prevent such loans from crystallizing into none performing loans or bad debts. The main aim of credit management is to ensure that the bank realizes its investment in the granting of loans and stimulate constant flow of income from the advances. Coyle Brain (2000) opined that the main fact is that credit management is concerned primary with managing debtors and financing debts. He went further to state that in the organization and the control of credit activities Management should ensure that responsibility for credit management are allocated efficiently, operating systems are in place and credit control staff are of suitable quality and properly trained and motivated. Another observation, credit management should be taken seriously, is that, one of the key service deliveries by the banks in Nigeria is loan administration and a major source of their revenue and profit. Also a careful examination of balance sheet of banks showed that loan and advances constitute the major item in the balance sheet of the banks. The banks must adopt strategy to ensure effective credit management, to prevent none performing loans which may lead it to illiquidity. Morton and Jonathan (2011) noted that Bank failure is caused by lax credit standard, ineffective portfolio risk policies and risk taken in excess of capital constraints. It is pertinent to note that any lending decisions has an element of risk or the other and a banker must take into considerations the risk elements of any loan advances critically. It means that the bank should not only analyze the loan request and its suitability but should also assess the risk implications of the advances given to their customers and ensure such loans are within the risk appetite of the banks.. It is pertinent to note that banks derived their greatest profit from lending. The greater the lending facilities granted to their customers the higher the profit and the risk elements associated with the lending. The bank must strike a balance between profit and its risk apatite to avoid a lot of bad debts which may hurt its profitability. In order words, the bank must avoid overtrading in pursuit of profit.
2.0) THE IMPORTANCE OF BANK LENDING IN THE ECONOMY:
Mordi (2010) observed that the basic functions of financial sector are: to provide efferent payment mechanism for the whole economy and intermediate between lenders and borrowers. These basic functions are domain of banking institutions. He further noted that banks and other financial institution play a vital role in facilitating the overall funding of the economy It needs not to be over emphasized that bank lending is very important in the economy, banks through financial intermediation help to stimulate the economic activities. John and Edward (2004) observed that financial intermediaries borrow one subset of agent in the economy and lend to another, and...
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