CREDIT MANAGEMENT AND INCIDENCE OF BAD DEBTS IN NIGERIA COMMERCIAL BANKS. A RESEARCH PROJECT MATERIAL ON BANKING AND FINANCE
The purpose of this study was to determine the level of credit management and incidence of bad debts in Nigeria commercial banks. In the ordinary course of lending banks including load debts, which are changed against the income generated by the cause for bad and doubtful debts.
Besides a cursory look at the annual statement of most commercial banks, relatively provide for bad debt more than the other banks. This fact could also be reflected in the elative performance of the banks. Indeed, many commercial banks in this country are on the verge of collapse particularly the state owned ones.
BACKGROUND OF THE STUDY
Banks economic purpose is to act as financial intermediary. It facilitates the process of channeling savings into investment and one of the avenues of realizing this objective is by lending effectively. Lending is considered effective if it is successfully reconciles with the banks obligation to maximize liquidity to the depositor and maximum profitability to the shareholder. It involves environmental analysis of banks objectives, resources possibilities and constraints economic environment. The resources flow and potentials in the economy as well the government, therefore involves a thorough appraisal of the position including the analysis of the financial statement, analysis of security to be offered and management competence specifically.
Lending requires development of clear-cut loan policy. Strong department organization loan review programme comprehensive credit files among other things. In the light of the above, a bank being under obligation to the shareholders and realizing the fact that the interest accruable from advance constitute the largest chunk of the annual income declared by bank considering also that banks lend to meet the economy in general. They should constitute religious commandment rather than mere techniques and guidelines, which have serious limitations. Political interference may go contrary to the laid down policy guideline.
From the fore going, it was recommended amongst others the state owned commercial banks should be effectively managed. Banks should use the services of external consultants/professionals to manage and collect debts on the account classified as doubtful and to avert the diversion of funds by some borrowing. The bank should try as much as possible to deal directly with contractors or suppliers of the borrowers, as the case may be.