RISK MANAGEMENT IN NIGERIAN BANKS (AFRIBANK NIGERIA PLC AND FIDELITY BANK NIGERIA PLC). A RESEARCH PROJECT MATERIAL ON BANKING AND FINANCE
ABSTRACT
This study examines the impact of risk management in Nigerian Banks. Data were obtained from the annual accounts and reports of the banks (AfriBank Nigeria PLC and Fidelity Bank Nigeria PLC). An event study methodology was employed to examine the effects of deposit, asset quality and credit risk exposures on the growth and profitability of Nigeria commercial banks.
Similarly, results shows the significant impact of asset on profit. On a whole, the study finds the need for banks in Nigeria to devote enough attention to the management of financial risks in the banking industry.
CHAPTER ONE
INTRODUCTION
- BACKGROUND OF THE STUDY
The Nigerian Banking Industry for the past decades has witnessed series of Banking distress and subsequent failures. Banks that had been doing well suddenly announced large losses due to credit exposures that turned sour, interest rate position taken or derivate exposures that may or may not have been assumed to hedge balance sheet risk. In response to this, there is indeed urgent need for banks in Nigeria to devote enough attention to the management of financial risks in the Nigerian Banking Industry. The 1989 annual report and statement of account of NDIC revealed that classified loans and advances or bad debts amounted to 9.4 billion which contributed 40.8 percent of total loans and advances and 280 percent of shareholders funds” (Hall, 1991:8). It is the development of his nature that have led to the introduction of the CBN prudential guidelines for banks.
Cooker (1989:115), observes that “the main function of a bank is the collection of deposits from those with surplus cash resources and the lending of these cash resources to those with an immediate need for them” in fulfilling this:
It must be easily understood It must be permanent
It must be able to absorb losses
These three features are expected to guide member countries, including Nigeria, in assessing instruments to be used in raising bank capital.
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