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The goal of this study is to look into the influence of credit management on commercial banks. Following the implementation of prudential guidelines in the banking industry, the number and value of loans and advances designated as non-performing accounts has continued to rise in bank lending. Obviously, this has a negative impact on banks because it impacts their cash flow and reduces profitability.

Most loans and advances fail due to bank inadequacies in credit management and recovery procedures. The main goal of this study is to evaluate lending in relation to bank credit management and the impact of prudential requirements on credit.

Union Bank of Nigeria Plc Okpara Avenue Enugu was used as a case study to highlight the efficacy, adequacy, or otherwise of Nigerian commercial banks’ credit management policies in order to identify the causes and effects of non-performing loans and advances. Excessive lending based on security values and poor borrower management are the root problems.

After analysing the data, the following conclusions were reached: the primary goal of bank lending is to create income, the loan deposit ratio influences commercial banks’ liquidity position, and non-performing accounts continue to rise. The frequent occurrence of non-performing accounts was discovered to be due to the banks’ inability to establish an efficient loan recovery mechanism.

The application of prudential requirements by Nigerian commercial banks reflects the banks’ real revenues. Finally, prudential standards limited commercial banks’ profits and required banks to precisely define their loans.

The researcher recommended that the provisions of the prudential principles be followed and that an effective loan monitoring unit be established in all commercial banks.


Banking is primarily a worldwide enterprise, especially given that many countries’ local financial markets are being internationalised. In the modern economy, there is a divide between surplus and deficit economic units. As a result, the savings and investment mechanisms are separated.

This has required the establishment of financial institutions whose primary function is to move monies from savers to investors. Commercial banks are one such entity.

Commercial banks’ intermediating roles place them in the position of ‘Trustees’ of surplus economic development savings. The approaches used by bankers in these intermediating functions should give them with complete knowledge of the outcome of a lending so that funds are distributed to investors with a one-to-one probability of full payback.

In practise, however, the opposite has always been true. Almost all lending decisions are made under conditions of ambiguity; the risk and uncertainty associated with lending decision situations are so substantial that lending bankers must apply the ideas of risk and risk analysis in order to support effective decision making and judgement.

This indicates that all hazards should be evaluated objectively. Unfortunately, many commercial banks have made loan decisions based on subjective criteria. In most cases, the emphasis is placed on the security given for the loan rather than paying attention to adequate loan monitoring and the insistence that credit recovery potential should be based on expected cash flow.

This has resulted in an increase in the number of non-performing advances.

The structural adjustment programme (SAP) implemented in 1980 resulted in the adoption of a wide variety of economic liberalisation and de-regulation policies, resulting in the establishment of more banks and other financial intermediaries.

As a result, it became imperative to strengthen and expand the Central Bank of Nigeria’s powers to include these new organisations in order to improve the efficiency of monetary policy as well as the regulation and supervision of banks and non-bank financial institutions.

Perhaps it is vital to emphasise that deregulation does not imply the absence of rules. The banking industry is widely regarded as being more regulated than any other sector of the economy. This is largely owing to the critical intermediation role played by industry operations.

The various deregulation measures provided rewards, opportunities, and challenges. The sector has become more competitive, which has created worry about abuses and violations inside the industry.

The necessity for prudential rules, as well as the current review of the banking decree, should be viewed in light of the aforementioned.

The prudential rules were released by the Central Bank of Nigeria’s (CBN) banking supervision department (BSD) on November 7, 1990, via circular letter No BSD/90/28/vol.1/11 to all licenced banks and their auditors. Its goal is to ensure a stable, secure, and sound banking system. It is intended to serve as a guide to the following banks.

a. Ensure a more conservative approach to credit portfolio classification, provisioning for non-performing facilities, credit portfolio disclosure, and non-performing asset interest accrual.

b. Ensure that their approach in (a) above is consistent.

c. Ensure the accuracy of published accounting information and operating outcomes.

Until recently, readers of licenced banks’ financial statements had reason to be concerned about the quality of such statements due to the varied and, in most cases, inconsistent practises employed by banks.

A number of people were concerned that banks’ profitability were being inflated since interest was being paid on nonperforming assets. Comparisons of bank performance have also become problematic.

As a result, prudential standards were issued to protect depositors’ interests, thereby boosting public trust in the banking sector.

On the other hand, the growing trend of provisions for non-performing credits in most commercial banks is a major source of concern not only for management but also for shareholders, who are becoming increasingly conscious of the risks posed by these non-performing credit facilities.

These eliminate a portion of the bank’s earnings assets, such as loans and advances, which are classed as the primary sources of earnings, and also influence bank liquidity and solvency.

In other words, non-performing loans cause two big issues: non-profitability and liquidity issues. A commercial bank, like any other business, must generate enough revenue to cover its operational expenses and provide reasonable returns on investment.

Given these issues, a wise lender should exercise prudence while lending and managing loans and advances in order to reduce the complications produced by classified credits.

In this study, we will investigate the possibilities of reducing the prevalence of non-performing loans by enhanced lending standards and effective controls. For the benefit of commercial banks, we will examine the lending method and credit management of Union Bank of Nigeria Plc, as well as the effectiveness or otherwise of the bank’s existing credit management policy. We will make recommendations on how to address any shortcomings shown by our research. C.B.N. recommendations (1990).


Since the implementation of prudential norms in the banking industry, the volume and value of loans advances categorised as non-performing have increased. The rise has continued at a quicker rate than the rise in bank lending.

Obviously, this has had a negative impact on banks because it impacts their cash flow and reduces profitability. Most loans and advances are thought to fail due to inadequacies in bank credit management and recovery procedures.


The primary goal of this research is to analyse the appraisal of lending in relation to bank credit management.


The scope of this study is limited to an assessment of Nigerian commercial banks’ credit management. The study is limited to Union Bank Okpara Avenue Enugu since it is impossible for the researcher to cover all of the banks in the study.


According to this study, anytime a credit is awarded, it is critical to recognise the moment at which such credits begin to seem suspect. This will allow the bank to achieve full repayment, including accumulated interest, at the very least, reducing the possibility of capital loss.

Because provisions for non-performing credits are calculated as a percentage of profit, we should examine the procedures, proportions, and margins of lending to non-performing facilities. As a result of the importance of this study to bankers,

they will be able to appreciate an effective appraisal of their lending and control mechanisms, especially given that they are expected to lend under tight monetary conditions. The study will benefit the economy as a whole because if the number of non-performing advances is lowered, banks will be left with more earnings to make the expected contribution to the economy’s development.


Ho1: The primary goal of bank lending is not to produce revenue.

Hi1, the primary goal of bank lending is to create revenue.

Ho2: The loan deposit ratio has no effect on a commercial bank’s liquidity condition.

Hi2: The loan-deposit ratio influences a commercial bank’s liquidity status.

Ho3: Classified debts are linked to the collateral used to secure the loan.

Hi3: Classified debt is linked to the collateral used to secure the loan.

Ho4: Loan recovery processes do not apply to non-performing credit.

Hi4: Nonperforming credit is reliant on loan recovery procedures.


Profitability: The bank’s tendency to have an excess of revenue over expenditure, resulting in profits.

Liquidity: This relates to a bank’s capacity to meet its financial obligations to customers, or it can refer to the ease with which banks can raise cash to meet varying demands.

Loan-Deposit Ratio: This is the ratio of loans to deposits.

Bank “Run”: A circumstance in which the banking public withdraws substantial amounts of money from a bank that is perceived to be in trouble.

NDIC: Nigerian Deposit Insurance Company: An entity founded to provide bank deposit insurance.

Credits that are performing: A credit facility is considered to be performing if payments of both principle and interest are made on time and in line with the agreed term.

Non-Performing Credits: When any of the following conditions exist, a credit facility should be considered non-performing.

i. Interest or principle is owed and has been overdue for 90 days or more.

ii. Interest payments totaling 90 days or more have been capitalised, postponed, or rolled over into a new loan.

Typical advancements

Substandard, questionable, and lost credits are the three types of nonperforming credit/advances. Substandard advances are those that have outstanding principle and/or interest for more than 90 days but less than 180 days.

Doubtful Advances: If the principle or interest is outstanding for at least 180 days but less than 360 days, the advance is considered doubtful.

Lost advances are those in which the principle and/or interest stay due for 350 days or more, according to the CBN prudential guideline (1990).

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