IMPACT OF BAD DEBT IN COMMERCIAL BANK LENDING IN NIGERIA
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IMPACT OF BAD DEBT IN COMMERCIAL BANK LENDING IN NIGERIA
In order to complete this objective, efforts were made to investigate the causes and consequences of subpar bank lending. We defined the goals of our study, which included determining the root causes of bad debt in banks and the wider economy and suggesting potential remedies.
As a conclusion to the objectives, a thorough literature analysis was also conducted in Nigerian libraries. Data was principally acquired through a field survey of the study population,
which consisted of 30 respondents, 20 of whom were successfully reached and accounted for 66.7 percent of the total population. The gathered information was displayed as a tabulation and a percentage for analysis.
1.2 STATEMENT OF THE PROBLEM
The impact of bad debt on commercial bank lending on the Nigerian economy has long been a source of public concern. It has come to the attention of the various managers in positions to grant loans to applicants without a decent or reasonable security as collateral.
This has made it so that certain clients, even when provided with a suitable form of collateral, frequently fail to meet the requirements of the contract.
This is due to the inconsistent ways that borrowers have responded to requests from different banking institutions (commercial banks) for the repayment of loans and advances they have received.
Additionally, this lowers the bank’s asset base, which leads to inflation by devaluing the naira on the foreign exchange market and deterring foreign and international investors from making investments in the nation.
But the main problems are:
1. Specifically, how does a commercial bank handle the impact of bad debt?
2. What are the real effects of bad debts on Nigeria’s commercial banks?
3. For how long does this bad debt continue to fuel inflation, which eventually results in devaluation?
4. What functions does management have in ensuring that the terms of agreements are rigorously adhered to.
5. The foreign currency market’s contribution to investment in our nation.
1.3 OBJECTIVES OF THE STUDY
The following goals are the focus of the study:
To assess the effects of bad debts on commercial banks that affect the Nigerian economy and to pinpoint the issues caused by bad debts. To establish its impact on the economy in general, to pinpoint its immediate and distant sources.
To offer constructive suggestions on how to improve the current control technique programme, after determining the amount and impact of risk at an acceptable rate and offering potential profound answers and conclusions.
1.4 SCOPE AND DELIMITATIONS OF THE STUDY
This study’s intended broader reach was hindered by some limitations that were not available, although it is still restricted to commercial banks and their employees.
Our precarious financial situation, which forced us to limit this amount due to the high cost of stationery, is one of the restraints.
The literature research and the theoretical justification examined some commercial banks’ unwillingness to divulge information about certain issues.
Because the study focuses on the effect of bad loans on commercial banks that drive the Nigerian economy, its conclusions cannot be applied to other types of institutions.
1.5 RESEARCH QUESTIONS
The following queries are answered by this research:
1. Do bad debts affecting Nigerian commercial banks have an effect on the country’s economy?
2. Do bad debts actually materialise in systems used by commercial banks?
3. Do banks actually understand both the benefits and drawbacks of bad debts?
4. In terms of bank leading, what issues are bad debts posing for the commercial banking industry and the economy at large?
5. How does the relationship between bad debt provision and profit, and the impact on personal and economic investment development, work?
6. Are there regulations managing the problems with commercial lending in Nigeria’s economy?
7. Do these regulations controlling concerns with bad debts differ or remain the same from one commercial bank to the next?
8. How frequently does the country’s commercial banking industry experience challenges with debt?
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