THE CREDIT AND LOANS MANAGEMENT PERFORMANCE OF COMMERCIAL BANKS IN NIGERIA
CHAPTER ONE
INTRODUCTION
1.1 Background to the Study
    The Financial institutions generally serve as financial intermediation. This form of asset intermediation is required to ensure that funds are moved from the surplus economic units to deficit economic units within the economy. These institutions like every other business organizations have some risks to manage before they can successfully achieve their aims and objectives, which are always almost profit oriented.
    The Nigeria banking sector encourages individual and organizations to grow by giving out credits, loans to them and also ensuring that organizations who buy goods or services on credit, or individuals who borrowed money, can afford to do so and that they pay their debt on time. Non-performing loans generally are loans which for a relatively long period of time do not generate income, that is, the principal and/or interest on the loans has been unpaid for at least 90 days (Lario and Klingebiel, 1999). The incidence of non-performing loans (NPLs) could occur when due, resulting in over-bloated loan interest due for payments.
    Poor credit management and non-Performing loans (NPLs) reduces the liquidity of banks, and credit expansion, they slow down the growth of the real sector with direct consequences on the performance on banks, the firm which is in default and the economy as a whole. Lending involves the creation and management of credits assets and is an important task in bank management this is so because the lending portfolio requires articulated lending policy. The policy should set out the bank’s lending philosophy and objectives including the modalities for implementation, monitoring, appraisal and review. Well conceived lending polices and careful lending practices are essential in facilitating efficient credit system and minimize risk in lending.
    One of the major components of bank assets is loans and advances, and the effective management of such loans portfolio is challenging. The failure of many banks is not because of their inability to mobilize adequate deposit from the economy, but mainly because the lending portfolio had been poorly managed. The banking sector is seen to have an important role to play in the economic development of the country. This is mostly pronounced in the realm of financial intermediation. However, previous studies on the sector showed that little success was recorded in this regard. Some banks find it difficult to meet the obligation to their customers and owners due to fault or weakness in managing their lending portfolio and the short coming which could render them either illiquid or insolvent.
1.2 Statement of the Research Problem
    The ultimate goal of all business organizations is survival among the competitors, growth, and fulfillment of social responsibility and above all the making of normal profit. But contrary to expectations, most banks in Nigeria in the past have been saddled with problem relating to loan and advances particularly credit management and non-performing loans (NPLs) which have gradually eroded their profits and their performances have been greatly retarded.
    The ability of banks to recover loans and advances granted to customers constitutes a major factor in the bank’s failure, obviously non-performing loans exerts negative impact on bank lending to the extent that non-performing loans have adversely effected bank earnings; and new loans are rarely or hardly made or granted. This unhealthy phenomenon has greatly retarded economic growth and development. Our core research question therefore is; to what extent has poor credit management affected bank lending performance in Nigeria? More specifically, we are seeking answers to three main research questions; viz:
1.    To what extents has poor credit management contributed to the growth of non- performing loans in Nigeria banks?
2.    What is the impact of macroeconomic performance of the Nigeria economy on the prevalence of non-performing loans in Nigeria?
3.    To what extent does bank composition of board of directors contribute to the incidence of non- performing loans in Nigerian banks?
1.3   Objectives of The Study
    Drawing directly from the above-mentioned research concerns, the study being proposed seeks to achieve three main objectives:
1.    To examine the extent to which poor credit management by Nigeria banks have contributed to incidence of non-performing loans.
2.    To determine the impact of macroeconomic performance of Nigeria economy on the prevalence of non-performing loans in Nigeria.
3.    To examine the impact of banks composition of board of directors on non-performing loans in Nigerian banks.
1.4 Research Hypotheses
i. Poor Credit management does not contributes significantly to non-performing loan in     Nigerian banking sector
ii. Macroeconomic variables do not contribute significantly to non-performing loans in     Nigeria banking sector.
iii. Compositions of boards of director do not contribute significantly to non-performing     loans in Nigerian banking sector.
1.5 Scope of the Study
    This study is limited to the credit and loans management performance of commercial banks in Nigeria using various banking variables with special focus on non-performing loans and how it affects the performance of banks. The study shall use annual bank related and macroeconomic data of 30 year’s period from 1980 – 2010.
1.6 Significance of the Study
    The study will be significant in many respects.
•    It serve as a guide to banks and financial experts who are involved daily in loan analysis, disbursement and administration and enable banks and supervisory authorities to re-evaluate existing policies needed for non-performing loans so as to determine whether the policies need to be changed, modified or retained.
•    It should also be of immense benefit to bank management loan officers, financial analysts etc, and it will serve as first hand information to them for facilitating the formulation of the right policy that will reduce non-performing loans in the banking sector.    
Lastly, it should be of a source of information to students of banking and related disciple as well as future researcher.  
 1.7     Limitations of the Study
    The major constraint is the reliance on secondary data. It was difficult to obtain data directly from each of the bank. However, the present study relies on data extracted from the publication of Central Bank of Nigeria (CBN) as well as Annual Report of selected banks in Nigeria. Therefore, we have assumed that such data obtained from these sources to be largely accurate enough to significantly reduce the problem of adequacy and reliability of data in our present study.