M.G Ajao

This study examined how credit risk management affects the profitability of six listed deposit money banks in Nigeria from 2014 to 2023. Using a balanced panel of 60 observations and a fixed-effects model with robust standard errors, the results show that both the non-performing loan ratio (NPLR) and loan loss provision ratio (LLPR) significantly and negatively affect return on assets (ROA) and return on equity (ROE). A one-percentage-point increase in NPLR reduces ROA by about 0.08 percentage points and ROE by about 0.65 percentage points, while higher provisions further weaken earnings. Bank size has a positive impact on profitability, supporting the idea that larger banks benefit from efficiency and stronger risk-absorbing capacity. This study also finds that the 2015–2016 recession and high interest-rate volatility confirmed through a persistent GARCH (1,1) effect further reduce bank performance. All diagnostic tests validate the reliability of the model. This study suggests that effective credit risk management is essential for sustaining profitability in Nigerian banks and recommends stronger credit appraisal systems, improved NPL recovery, full IFRS 9 implementation, diversified income sources, and stronger macroprudential policies