An Evaluation Of Credit Management And The Incident Of Bad Debt In Nigeria Commercial Bank (case Study Of Union Bank Of Nigeria)

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          The growing case of classified debts and the increasing trend in the yearly provisions for bad and doubtful debts in commercial banks suggest that there may be errors in the administration of credit by the commercial banks in Nigeria. With this background, the leading policies of the credit management in a typical commercial bank the Union bank of Nigeria PLC was appraised with a view to ascertaining the causes and consequences of bad debts as well as to find ways and means of reducing the incidence therefore.  The researcher thought test techniques intended to ascertain which find diversion has any effect on bad debts of Union Bank, to determine to extend to which government intervention in unding policies of Commercial banks has influence bad debt in Union Bank and to determine the extend to which government intervention in lending policies of commercial banks has influenced bad debt in Union bank and to determine the extend to which improper project evaluation influences bad debts of Union bank.

          A questionnaire was used to collect data and together with information obtained from oral interview and desk research as well as documented and analysed by the  use of Chi-square statistical test techniques. Three hypothesis were tested on effect of fund diversion, government intervention in lending policies and the extent to which improper project evaluation influenced bad debt of Union bank.

          Relevant variable were determined and the effectives of bank loan management were measured using statistical indices and ratios.

          Evidence from the reglanch shows to the acceptance that fund diversion affect bad debt in Union Bank, government intervention has direct influence on Union Banks bad debt and that improper project evaluation has significant influence and bad debt of Union bank.

          On these basis, the researcher made her recommendations and concluded that banks should lent to viable projects and ensure that it is backed by adequate collateral.

          It is suggested that future research in this area should examine on community banks, foreign banks and government owed bank like federal mortgage bank of Nigeria.  





Title page

Approval page





1.1            Background of the study

1.2            Statement of the problem

1.3            Objective of the study

1.4            Research questions

1.5            Research Hypothesis

1.6            Significance of the study

1.7            Scope and Limitation of the study  

1.8            Definition of terms



2.1            Theoretical Review

2.2            Empirical Review


3.1            Research Design

3.2            Research Methodology

3.3            Sources of Data

3.4            Method of data presentation.




In a modern Economy there is distinction between the surplus economic unit and the deficit in consequences a separation of the saving investment mechanism. This has necessitated the existence of financial institution whose job includes the transfer of fund from sales to investors. One such institution is the commercial bank.  The intermediating roles of the banks places them in a position of trustees of the saving of the widely dispersed surplus economic unit as well the determinant of the rate and shape of economic development.  The techniques employed banks in this intermediating function should provide them with perfect acknowledge of the out come of a lending such that funds will be allocated to investment in which the probability of full repayment is certain.

          However, in practice no such tools can be found in the decision of the lending bank virtually all lending decision are made under condition of uncertainty. They risk and uncertain associated with lending decisions. Situation are so great that the concepts of risk and risk analysis need to be employed by lending banker in order to facilitate sound decision making and judgment.

The increasing trend of provision for bad and doubtful debts most commercial bank is a major source of concern not only to management but also to the  share holder who are becoming more aware of the damage posed by these debts. Bad debt destroy part of the earning assets of bank such as loans and advance which have been described as the main source of earning and also determine the liquidity and solvency of banks.  In the other words bad debt in commercial bank generate two major problem that is profitability problems. Bad debt emotive words to bankers. Because they represent losses to banks.  There are various reason for the occurrence of bad debt and its impart on the banking operation.

CAUSES OF BAD DEBT: The causes of bad debt could be based on four main classified causative agents.  They are a follows. Borrowers/Customers



Nature related factors

1.                 BORROWERS/CUSTOMERS:

IGNORANCE: Customer are ignorance for the fact that bank like other commercial ventures are out to make profit by selling their product (loan) instead they understood it to be a place where government and other will- to –do people stove they money.

Consequently, they regard any amount borrowed to be “ national case” them as an articles purchased which must be paid for on the part of our etiles in white they gratuity which should not be repaid.  Again some customer/borrower over invest the loan approved on infrastructure to the betterment of actual purpose. This creates a situation factor thereby occasioning bad debts.

          1.       BANKS

                             This concerns efficient disbursement and amortizing

schedule be bank. This relate to poor evaluation of customers; The first point which readily come to mind for this bad debt is poor evaluation of customer by the supervision before giving out loan to them. The pre requisite for giving out loan is on the consideration of the following.

CHARACTER: The likelihood that customer will try to honour obligation

CAPACITY: The subjective appraisal of the customer ability to pay.

COLLATERAL: assets that customer may offer as security to obtain credit

Condition: Impact on general or specific economic trend.

          (ii)     High Interest chargeable by bank sometimes occasioned a

situation of bad debt because the interest adds to increase the amount to be repaid.

(iii)    Absence of forum by bank for enlightenment education of

customers resulting to bar to procedure on report lodgment for joint solution.

          (iv)    Improper evaluation of profit by bank: a situation whereby


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