Risk Management Implications on Performance of Deposit Money Banks in Nigeria (1998 -2016)

This study examine drisk management implications on the performance of deposit money banks in Nigeria. Risk management is a core of lending function in the banking industry. Many Nigerian banks had failed in the past due to inadequate risk exposure. In modeling, bank performance was used as the dependent variable represented by return on assets (ROA), While for the influence of credit risk, the ratios of total loan to deposit (LDR), non-performing loans to total loans (NLTL) and total loans to total assets (TLTA) are used as the independent variables..The data were obtained from the Financial Statements and Reports of the sampled banks for the period 1988-2016,various issues of Central Bank of Nigeria Annual Report and the National Economic statistics from the National Bureau of Statistics. The analysis used time series data on capital market indicators for the period 1988-2016.. The availability of sufficiently long time series data on the aforementioned variables served as an additional criterion for their selection. Annual data spanning 1985 to 2016, a total of 31 observations, were employed; all variables were transformed logarithmically to homogenize the data and smoothen the fluctuations. The procedure adopted involved the use of multivariate regression analysis. Autoregressive Conditional Heteroskedasticity models and its extension were used. The result of the econometric tests leads us to conclude that there is a significant relationship between the various risk management indicators employed in this study and the performance of deposit money banks in Nigeria Hence, we recommend to the Central Bank of Nigeria, for policy making purpose should regularly assess the lending attitudes of deposit money banks and their effective cash management policies to avoid insolvency in the financial system.

KeyWords: Risk Management, Shift ability Theory, Financial Institutions, Profitability.