TABLE OF CONTENTS

Title page        -           -           -           -           -           -           -           -           -           -           i

Declaration      -           -           -           -           -           -           -           -           -           -           ii

Certification    -           -           -           -           -           -           -           -           -           -           iii

Approval-        -           -           -           -           -           -           -           -           -           -           iv

Dedication      -           -           -           -           -           -           -           -           -           -           v

Acknowledgment       -           -           -           -           -           -           -           -           -           vi

Table of content          -           -           -           -           -           -           -           -           -           vii

Abstract          -           -           -           -           -           -           -           -           -           -           x

CHAPTER ONE:  INTRODUCTION

1.1       Background to the Study       -           -           --          -           -           --          -           1         

1.2       Statement of the Problem                   --          -           -           -           -           -           2

1.3       Objective of the Study           -           -           -           -           -           -           -           3

1.4       Significance of the Study       -           -           -           -           -           -           -           3

1.5       Scope of the Study     -           -           -           -           -           -           -           -           3

1.6       Definition of key Terms          -           -           -           -           -           -           -           4

CHAPTER TWO: LITERATURE REVIEW

2.1       Introduction    -           -           -           -           --          -           -           -           -           5         

2.2       Concept of Risk Management in Money Deposit Banks       -           -           -           5

2.3       Credit Administration in Money Deposit Bank         -           -           -           -           6

2.4       Techniques of Credit Risk Management in Deposit Money Banks    -           -           11

2.5       Credit Administrative Techniques in Deposit Money Banks -           -           -           14

2.6       The Problems Militating against Credit Risk Management and Credit Administration in     Deposit Money Banks  -           -           -           -           -           -           -           -           15

2.7       Summary         -           -           -           -           -           -           -           -           -           15

CHAPTER THREE: RESEARCH METHODOLOGY

3.1       Introduction    -           -           -           -           -           -           -           -           -           17       

3.2       Research Design         -           -           -           -           -           -           -           -           17

3.3       Population and Sample Size of the Study      -           -           -           -           -           17

3.4       Sources and Method of Data Collection        -           -           -           -           -           17

3.5       Validity of the Instrument      -           -           -           -           -           -           -           18

3.6       Reliability of the Instrument   -           -           -           -           -           -           -           18

3.7       Method of Data Analysis       -           -           -           -           -           -           -           18

CHAPTER FOUR: DATA PRESENTATION AND ANALYSIS

4.1       Introduction    -           -           -           -           -           -           -           -           -           20

4.2       Respondent Characteristics    -           -           -           -           -           --          -           20

4.3       Data Presentation and Analysis          -           -           -           -           -           -           21

4.4       Summary of Findings -           -           -           -           -           -           -           -           26

4.5       Discussion of Findings           -           -           -           -           -           -           -           27

CHAPTER FIVE: SUMMARY, CONCLUSION AND RECOMMENDATION

5.1       Summary         -           -           -           -           --          -           -           -           -           29

5.2       Conclusion      -           -           -           -           -           -           -           -           -           29

5.3       Recommendations      -           -           -           -           -           -           -           -           30

5.4       Suggestion for Further Studies           -           -           -           -           -           -           33

            References      -           -           -           -           -           -           -           -           -           35

            Appendix        -           -           -           -           -           -           -           -           -           36

ABSTRACT

The study assesses credit risk management in Nigerian Deposit Money Banks. The research questions that guided this study were: How is credit risk managed in Nigerian Deposit Money Banks? What are the constraints militating against credit risk management and credit administration in Nigerian Deposit Money Banks? What are the solutions to the identified problems? The survey method of research was used in this study. A questionnaire designed in five likert scale was used as the instrument of data collection. The mean (x) was used to analyze data. The result of findings indicates that credit risk is mainly managed in Nigerian Deposit Money Banks through embarking on insurance of customers deposit as well proper evaluation and monitoring of loan proposal. It is recommended that Nigerian Deposit Money Banks must receive sufficient information to enable a comprehensive assessment of the true risk profile of the borrower by establishing a well-defined credit granting criteria in order to guard against loan default.

CHAPTER ONE

INTRODUCTION

1.1       Background to the Study

Credit Risk Management (CRM) is the identification, assessment and prioritization of credit risks (CR) associated with loan defaults. It is the effect of uncertainty on objectives, whether positive or negative followed by coordinated and economic of application of resources to monitor and control the probability and/or impact of unfortunate events or to maximize the realization of opportunities (Okeh, 2006).

Risks can come from various sources including uncertainty in financial markets, threats from project failures (at any phase in design, development, production, or sustainment life-cycles), legal liabilities, credit risk, accidents, natural causes and disasters, deliberate attack from an adversary, or events of uncertain or unpredictable root-cause. There are two types of events i.e. negative events can be classified as risks while positive events are classified as opportunities

The survival of every Deposit Money Bank (DMB) depends on its ability to manage its risks and loans or advance portfolio effectively. However in the recent past, deposit money banks in Nigeria witnessed rising non-performing credit portfolios and these significantly contributed to the financial distress in the banking sector.

Financial organization need to manage the credit risk inherent in the entire portfolio as well as the risk in individual credit or transaction. This is so because the survival and ability of financial institution to compete depend on their ability to profitability and manage credit risk. This is the reasons why lending is based on the two fundamental products of banking: money and information. Banks obtain these products from customers themselves by offering customer valuable services. They package money and information about their borrowers together with valuable banking services to create loan agreements and sell the loan agreements back to their customers (Hempel and Simonson, 2007).

As such, risk rating system in financial institution contains both objective and subjective elements. Objective aspects are based on financial statements and application of certain financial ratio that reflect liquidity, leverage and earnings. Despite the requirement that risk be quantified, risk rating systems always have a subjective dimension that attempts to capture intangibles such as the quality of management, the borrower’s status within the industry, and the quality of financial reporting. These subjective items may result in inconsistencies.

It is in this regard that many financial institutions have faced difficulties over the years arising from their inability to effectively manage credit risk. As such the major cause of serious banking problems continues to be directly related to tax credit standard for borrowers and counterparties, poor portfolio risk management, or lack of attention lead to deterioration in the credit standard of a bank’s counterparties. Hence, the need to assess credit risk management in Nigeria Deposit Money Banks becomes imperative.

1.2       Statement of the Problem

Deposit Money Banks in the recent past witness rising non-performing credit portfolios sequel to the inability of their management to effectively manage credit risk and its administration. That problem resulted to high bad debts in deposit money banks and a number of other money deposit banks were classified as distressed banks by the monetary authorities.

Consequently, the need for an Assessment of credit risk management in Nigeria Deposit Money Banks becomes worthy of study. The study answered the questions below:

How is credit risk managed in Nigeria Deposit Money Banks?

ii)         How is credit administered in Union Bank Plc Kaduna Main Branch?

iii)                What are the constraints militating against credit risk management and credit administration in Nigeria Deposit Money Banks?

1.3       Objective of the Study

The main objective of the study is to assess credit risk management in Nigeria Deposit Money Banks. The specific objectives are to:

i)                    Examine credit risk management system in Nigeria Deposit Money Banks.

ii)                  Assess credit administration in Nigeria Deposit Money Banks.

iii)                Identify the constraints militating against credit risk management in Nigeria Deposit Money Banks.

1.4       Significance of the Study

This study could be beneficial to financial institution especially  Banks operating in Nigeria, as they utilize the finding of this study as a basis for policy formulation regarding credit risk management and credit administration in Banks. The shareholders, stakeholders and the entire society could benefit from this study as to know their contractual relationship with banks in terms credit and loan.

1.5       Scope of the Study

The study assessed credit risk management in Nigeria Deposit Money Banks, with emphasis on some banks in Kaduna metropolis. To this end, the study examined how credit risk is being managed in selected Nigerian Bank as well as credit administration. The study covered a period from 2011 – 2015 due to availability of reliable information.

1.6       Definition of key Terms

The key terms below were used in this study

Business Risk:Thisis the possibility a company will have lower than anticipated profits or experience a loss rather than taking a profit.

Credit Administration:This is the system used in managing the exposure of financial institution to loan delinquency and default.

Credit Risk: This refers to delinquency and default by borrowers i.e. failure to make payment as at when due. It is the risk of default on a debt that may arise from a borrower failing to make required payments.

Loan Appraisal:This is the process of determining in advance the various lending parameters and determining the overall loan limit for each borrower based on his debt capacity, loan duration.

Price Risk:This refers to variability in cash flows due to change in input and output prices. It is also called absolute risk, is a category of threat that is beyond human control and has only one possible outcome: loss

Pure Risk:This refers to reduction in business value as a result of damage to business property by theft, robbery, fire, flood or the prospect of premature death of employee due to work-related illness or accident.

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