THE EFFECT OF POOR CREDIT ADMINISTRATION ON BANKS PROFITABILITY IN NIGERIA: (AN EMPERICAL ASSESSMENT OF SELECTED BANKS)

Interest in this study arose because of the yearnings of the interested parties in commercial banks to the effect that the amount provisioned on loans and advances is ever-increasing and adversely depleting bank's earnings. Before the promulgation of the Prudential Guidelines in November 1990, the 1969 Banking Act did not make any provision on debt provisioning, it only called for returns on bad and doubtful debt in its 5th schedule from commercial banks without making recommendations on how it should be provided. The banking industry however, has entered a new phase in its present cycle of development following the various reforms as embarked upon by the Central Bank of Nigeria The consolidation exercise through merger and acquisition of banks came as a shook to the sector which prior to the exercise had eighty nine (89) banks operating at the fringe of modern consumers' services with low capital and asset bases mainly characterized by family and individual ownership. The issues investigated in this research is how the Asset Management Corporation of Nigeria would assist banks in their solvency and contribute to the revamping of those that failed to make enough provision for bad debts and endangered their capita/ adequacy. To achieve this therefore, statistical tools were employed to analyze data obtained from interviews and corporate reports. It was observed that banks perform badly because of their poor management techniques. Factors responsible for the mounting problem of debts management were also identified and traced to three sources; the lending banker, the borrower and the external forces. Finally, the impact of the Asset Management Corporation of Nigeria was critically examined, recommendations were made on ways and means of recognizing early warning signals for non performing loans and ways of handling them.