Examining the Effects of Sectoral Credit on Liquidity of Banking Sector in Nigeria

Exploring Critical Credit Risk Drivers in the Ethiopian Banking Sector

This study investigates the determinants of credit risk in Ethiopian commercial banks over the period 2017–24, using Loan Loss Provisions as a proxy for non-performing loans. Employing panel regression models, the analysis identifies value-added intellectual capital and capital adequacy as consistent, significant predictors of lower credit risk across banks with varying ownership structures. Larger bank size is associated with reduced credit risk; however, this relationship is largely driven by the dominance of a state-owned bank and weakens when the sample is restricted to private banks. Other bank-specific variables – management risk appetite, income diversification, and cost of inefficiency – exhibit no statistically significant effects. Among macroeconomic indicators, remittances are linked to higher credit exposure, while GDP growth modestly mitigates credit risk by strengthening borrowers’ repayment capacity. Trade openness and inflation appear to exert limited influence (Islam & Mia, 2023). Overall, the findings highlight the importance of intellectual capital efficiency, robust capitalisation, and ownership structure in shaping credit risk dynamics in Ethiopia’s banking sector. Policy implications include fostering intellectual capital development, maintaining adequate capital buffers, and supporting macroeconomic stability.

Investigation of the impact of capital adequacy on bank stability in Nigeria: A panel data analysis

One essential factor that drives the financial system is the stability of the banking industry, particularly in developing economies like Nigeria, where macroeconomic volatility and credit risk remain prevalent. To ensure the banking system continually supports the economy, this study examines the impact of capital adequacy on the stability of deposit money banks in Nigeria. In this study, Fixed Effects and Dynamic Ordinary Least Squares are employed to analyse panel data from 11 Nigerian banks from 2014 to 2023. The results indicate that the capital adequacy ratio, liquidity ratio, and bank size have a positive and significant impact on banking stability in Nigeria. The result indicates a persistent level of bank resilience, underscoring the need to ensure a stable banking system. Asset quality, inflation, and interest rates adversely affected bank stability in Nigeria. Similarly, the cost-income ratio has a significant impact on banking stability. In light of these findings, the study recommends that the regulatory authority should enhance oversight, particularly in the area of loans. Finally, the regulator should keep pace with the recapitalisation reforms in the banking sector to make Nigerian banks more stable, thereby boosting public confidence and supporting economic growth.

CLIMATE-INDUCED CREDIT RISKS AND THE FINANCIAL STABILITY OF COMMERCIAL BANKS IN KENYA

Evaluating the Relationship Between Credit Risk and Bank Performance in Nigeria: Ardl Analytic Approach

This study investigated the relationship between the upside potentials inherent in credit risk and the performance of deposit money banks (DMBs) in Nigeria. While credit risk is traditionally perceived as a threat to banking stability, emerging evidence suggests that it can also present opportunities for enhanced profitability if effectively managed. The study obtained data from the Nigerian Deposit Insurance Corporation where credit risk proxied by the ratio of non-performing loans to total loans (NPLTL) and average liquidity ratio (ALR) as explanatory variables, whereas return on assets (a proxy of bank performance) as dependent variable, spanning from 1990 to 2023. The Autoregressive Distributed Lag (ARDL) model was employed to estimate the models. Findings indicate that the ratio of non-performing loans to total loans and advances (credit risk) significantly affects bank return on assets, a proxy for deposit money banks' performance, whereas the average liquidity ratio has no significant impact on return on assets. From the findings, Deposit money banks should adopt a dynamic credit risk management practice; flexible risk management frameworks that allow them to exploit profitable lending opportunities while controlling potential losses, among others. The study contributes to the literature on the credit risk-bank performance nexus, given the ever-changing dynamic economic environment faced by Nigerian banks.

Measuring the Impact of Credit Policy on the Financial Performance of the Banking Sector in Iraq

Liquidity Regulation and Bank Performance: Evidence from Nigeria

This study examined the effect of liquidity regulation on the performance of commercial banks in Nigeria over the period 1990 to 2025. The specific objectives were to ascertain the effect of liquidity regulation on bank profitability, operational efficiency and market valuation, proxied respectively by Return on Assets (ROA), Cost-to-Income Ratio (CIR) and Market Capitalisation (MCAP). Liquidity regulation was measured using the Liquidity Ratio (LR) and the Loan-to-Deposit Ratio (LDR). Anchored on the Liquidity Preference and Liability Management theories, the study adopted an ex post facto research design and employed the Autoregressive Distributed Lag (ARDL) bounds testing approach to cointegration, given the mixed order of integration of the variables. Secondary time-series data were sourced from the Central Bank of Nigeria (CBN) Statistical Bulletin, CBN Financial Stability Reports and the Nigerian Exchange Group. The findings revealed that the Liquidity Ratio exerted a positive and statistically significant long-run effect on profitability and a negative significant effect on the Costto-Income Ratio, indicating that stronger liquidity buffers enhanced both earnings and operational efficiency. Conversely, the Loan-to-Deposit Ratio had a negative significant effect on profitability and a positive significant effect on the Cost-to-Income Ratio, suggesting that aggressive credit expansion relative to the deposit base eroded performance. The bounds test confirmed a long-run cointegrating relationship between liquidity regulation and market valuation; however, the individual coefficients of LR and LDR on MCAP were statistically insignificant, implying that investor valuation in Nigeria is driven more by profitability and macroeconomic conditions than by liquidity indicators. The study concluded that liquidity regulation is a significant determinant of bank profitability and efficiency but a weak direct driver of market valuation. It was recommended, amongst others, that the CBN should periodically recalibrate the minimum liquidity ratio in line with macroeconomic conditions, and that bank managers should adopt dynamic asset-liability management frameworks to balance regulatory compliance with profitability objectives.