Investigating the Impact of Credit Risk Management on Bank Performance

The banking sector serves as a vital component in the economic growth and stability of any nation, primarily through its intermediary function of channeling funds from surplus to deficit units. However, this core activity exposes banks to significant risks, particularly credit risk—the possibility that borrowers may default on loan obligations. Such defaults can lead to liquidity constraints, rising non-performing loans, and potential insolvency, thereby threatening overall financial stability. To mitigate these challenges, banks must adopt sound credit risk management strategies aligned with international regulatory frameworks such as the Basel Accords. Effective credit risk management not only minimizes exposure to potential losses but also enhances profitability, investor confidence, and operational resilience. Against this background, the present study examines the impact of credit risk management on the performance of deposit money banks in Nigeria, focusing on how effective risk control practices influence profitability, stability, and efficiency within the Nigerian banking sector.