1-1           INTRODUCTION

The major objectives of any country in the management of its economy is the achievement of a sustainable level of economic growth.  This require capital, raw materials and technical know-how.


Aminu (2003) define Financial Institution as “ an institution that accept money from sources and use those funds to make loans and other financial investment in their own”.  They include Commercial Banks, Savings Institutions, Insurance Companies, Pension funds, Financial Companies and Mutual Funds.


Teriba (1976) stated that commercial and Central banks are financial institutions.  The word “Finance” has to do with money, how it is managed and invested.  The borrowed money invested is termed as capital.  An institution is an organized body set up for a particular purpose.  Hence, financial institutions are organized bodies that deal with money or capital.


Some of them accept savings deposits and extends credit just as commercial banks do.  (Although without able to create money in the proceed other services, simply as an intermediary between borrowers and lenders or undertake investments on their own-account.


The basic goal of credit management is to maintain the value of the bank by achieving a trade off between liquidity (risk) and profitability.  Pandey (1988) stated that ‘the purpose’ of credit management is not to minimize sales, nor to minimize the risk of bad debt.  If they were to minimize sales then the firm would sell on credit to all.  On the contrary, if minimization of bad dept risk were the aim, then the firm would not sell on credit to anyone.  In fact, the bank’s cash flow expanded to an extent to which risk remain within an acceptable limit.  Thus, to achieve the goal of maximizing the value of credit, the banks should in its activities:

1.                 Obtain the optimum (not maximum) volume of liquidity

2.                 Control the cost of credit and keep it at minimum

3.                 To maintain investment in debtors at optimum level.


Pandey (1988) further stated that the level of debtors to a great extent is influenced by external factors, such as the industrial norms, level of business activity, several factors and the degree of competition.  But there are a lot of internal factors, which influence the bank’s credit policy.  There factors include credit terms, standard, limits and collection procedures.  The internal factors should be administered to optimize the investment in debts.  The objectives of credit management therefore should be the achievement of a balance that maximizes the overall return of the bank.


Management according to Fayol (1916) can be described as the continuous systematic process of planning, organizing, leading, staffing and controlling of organization resources of firms (man, money and material) to the ends that individual organization aims and objectives could be achieved.


Finally, financial institutions are aimed at providing financial assistance to individual and corporate bodies without playing the important optional profitability to the shareholders, depositors and alike.  A bank is expected therefore to ensure sufficient liquidity of funds to meet cash demands by its customers at short notices.  This is an addition to maintaining a sufficient profitability level through proper and efficient management of their resources.


In the light of these facts above, the project seek to evaluate the credit management strategies in commercial banks with emphasis on Credit management Department, First Bank Nigeria Plc, Zoo Road, Branch, Kano.



Over the years, the Nigerian banking System has been under severe stress as a result of the large amount of non-performing loan (classified loans or bad and doubtful debts).  Poor management is at the heart of the Nigerian banking system.  Many managers just have not developed the skill of getting work done through others with clear measurable goals that they can prepare for and motivate them to attain their goals.


Management can also become outdated whenever its skill is irrelevant today; and may in fact be guaranteed for failure in the information age.


The lack of component and efficient staff in the credit department and also interference of government on behalf of well connected customers created a lot of problems in the management of credit in Nigerian commercial banks.  Rapid increase in the credit facilities extended by banks to meet the demand of their customers, due to unsecured nature of these loans, and poor collateral securities that are being extended by such customers, the banks do not recover loans, thus, increasing their credit account.

In view of this, management of credit has to be taken into consideration.  This is to say those who are responsible for the extension or issuance of credit have to be extra ordinarily careful in doing this.  Therefore, these issues constitute the basic of carrying out this research work and to come up with possible solutions so as to meet up with the demand and societal challenges.



The major objectives of this research work having noted the challenges and issues bringing about it are:

-                     To find out the conceptual framework of credit management in Nigeria Commercial banks more particularly First Bank Nigeria Plc.

-                     To find out the various management procedures undertaken by First Bank Nigeria Plc.

-                     To find out the parameters for appraising the performance of a banking credit management.

-                     To find out credit policy in First bank Nigeria Plc.

-                     To give recommendation or suggested solution on how to minimize credit crisis in the sector.




Hypothesis are assumptions that can be proved to right or wrong based on the findings of a research.  It is a tentative statement that shows the relationship between two variables.  It is vital to state that the research problems cannot be solved until they are reduced to a hypothesis.


The hypothesis will be based on the following assumptions


H1:    Loans are approved from the Bank head office.

Ho:    Loans are not approved from the bank head quarters.



HI:     The customers settle their account when it is due

Ho:    The customers do not settle their account when it is due



H1:    The banks have adopted some measures to recover credit facilities

Ho:    The banks have not adopted some measures to recover credit facilities



H1:    The measures are effective and efficient

Ho:    The measures are not effective and efficient



This comprise of the following:

1.                 At what levels are credit approved?

2.                 What measures do the bank follow in the management of credit facilities?

3.                 Are the measures efficient and effective?

4.                 How do customers (debtors) respond to repayment of such credits?

5.                 What steps do the bank take to recover credit facilities?

6.                 What other measures do the bank suggest to be used by other banks to reduce the level of creditors.



The profitability of any bank is defined by the earning gain from granted good credit to customers, thus, it becomes very crucial to such financial institutions to extend such credit in a manner they are easily recovered and managed in such a way that even if error do occur, they are at a minimal and does not very much affect the profitability of such unsteadiness.


Thus, the study is relevant to all financial institutions and all organization that involve in credit sales and its findings will form a sort of foot path to follow in granting out such and how the occurrence of credit account are minimized.  Also, other public sectors and shareholders may have some indication of the current banking process in minimizing such bad and doubtful debts and judge the accountability and stewardship of the management and directors.


Another significance is that, it would enlighten students of Accounting and other who may wish to know the methods and procedures used in managing credits.


1.6            SCOPE OF THE RESEACH

The research, an appraisal of credit management strategies in commercial banks is strictly limited to First Bank Nigeria Plc, Zoo Road Branch, Kano 2003 – 2005, Department of Credit Management.



This research work was hindered by specific problems highlighted below:

First and foremost, my appraisal of credit activities in commercial banks was not generalized to all commercial banks in the country but limited to First Bank Nigeria Plc, whose operations form the basis of our research.


Secondly, some textbooks and literature used do not contain detailed fact on credit management in the banking industry as the topic is often treated in the past.


Thirdly, the research work was hindered by time, money and communication, as my access to data needed for the study was limited to sources available in, as I was unable to reach out to other sources outside this locality.  More so, I had to abide with the project completion period as scheduled by the school.



For the purpose of clarification, we attempt to define most of it if not all – unfamiliar terms/words which I consider useful in the cause of compiling this piece of research work.

1.       Advance:  This is a form of loan or credit received by customers to guarantee payment of expected future obligations.


2.       Account Receivable:  This is an amount of money owed to a firm by customer who has bought goods or services on credit.


3.       Account Payable:  This is an amount of money owed but not yet paid and considered payable within the next twelve (12) months period.


4.       Accounting Rate of Return (ARR):  This consists of adding all the earnings after depreciation and dividing them by the project’s economic life.


5.       Balance Sheet:  This is a condensed statement showing the nature and amount of company’s or bank’s assets, liabilities and the capital on a given data during a given period of time.


6.       Balloon Payment:  This is a payment on credit that is much larger than other payments.  The ultimate balloon payment is the entire principal at maturity.


7.       Collateral:  Personal or real property pledge as security for security credit or advance.


8.       Customer:  A client, person or cooperation who operates an account for normal banking transaction with a bank.


9.       Debenture:  This is a long term unsecured credit instrument.


10.     Debt:  A sum of money that somebody owes


11.     Liquidity: An ability of bank or any other business enterprise to convert non-cabs assets into cash that would enable the institution or enterprise to meet it short-term obligation.


12.     Overdraft: An agreed amount of money which may be added to the credit side of a customer’s account against which is permitted to draw cheque.


13.     Loan/Credit:  A business transaction between two legal entities whereby one party known as “lender” agree to lend funds to other party known as “borrower”, loan/credit may either be short or long-term in duties.


14.     Write Off:  The right of canceling obligations, debts, loans.  Once payment is perceived as difficult on the part of the debtor. On the other hand, it is a lawful act of canceling or reducing part of whole of loans or credits by creditor bank.













2.1            INTRODUCTION

Credit management lies at the heart of banking.  Although, banks initially emerged as deposit takers, they soon matured into intermediators of funds, thereby assuming credit risk.


Majekodunmi (2003) asserted that credit becomes the business of banking and the primary basis on which a bank’s quality and performance are judged.  The credit management process therefore, which is anchored by a bank’s credit department deserves special emphasis because credit management greatly influence the success of failure of any financial institutions.  It may also interest to note that studies of banking crisis throughout the world have shown that the most frequent factor in the failure of banks have been poor assets (usually loan) quality.  Many bankers and regularly authorities believe that an understanding of a bank credit management process provides a lending indicator of the quality of a bank’s credit portfolio.


It may be appreciated that while assets quality directly reflects the quality of management, it is also significantly influenced by other factors, including government policy, macro economic conditions and the nature and interests of bank ownership in turn influence management.  Despite the importance of the external influences on banks assets quality, evaluating the credit management process, which is the central function of bank credit department, is an essential complement to an analysis of a bank’s loan portfolio and financial statements.  Building strong credit management department is a sine qua non for strong banks.


In the light of this, credit has been variously defined by different authors.  O. Sayemah R. (1992:40) asserted that “credit by bank is resource allocation function which involves mobilizing and channeling resources from saving surplus economic units to saving deficits units, thus helping to stimulate the level of economic activities in various sectors of the economy”.


Ekundayo J. O. (1995:7) contended that “credit implies the sourcing or provision of funds in short, medium or long term basis to incorporate businesses and individuals either as working capital for investment, capital formation purposes, expansion or other valuable reason”.


Kurfi (2003) commercial banks are the main source of short-term debts that are likely to be guarantee for immediate financial needs.  They are basically referred to loans that have a short maturity period usually one or two years.


Pandey (1988) on the contrary to short-term credit, long-term credit has a longer period of maturity.  Its maturity period may range from five years to above.


Ahmed (1999) refers to secured loan or credit to loans that are obtained.  Contrary to unsecured loan basis, either because the debtors are not up to proven or his ability to service credit is not regarded as adequate by the bankers, most lenders will not grant a loan unless the bank have expected sufficient cash flow to make proper servicing of credit.

Ahmed (1999) on the contrary to short-term loan or long-term loan.  Some borrowers obtain credit without pledging of any collateral securities such as a risk credit or loan given is referred to as unsecured; in such case some other factors may be considered before the approval of credit.



Majekodunmi (2003) the core function of a bank’s credit department is the formulation of the bank’s risk management policies, strengthening of internal controls and risk management procedures.  The quality of the bank’s risk assets portfolio is the main concern of the department.


Peter (1999) in most banks, the department responsible for managing their risk assets is referred to as credit administration, credit controls or credit compliance department.  Some other banks refer to this department as the risk assets management department.  However, whatever name a bank calls its credit department, their function across different banks may be categorized along the following lines:

-                     Assessment Department

-                     Control Department

-                     Credit recovery or loan work-out department



The department is responsible for appraising all the bank’s customers’ credit request as submitted by credit officers.  Majekodunmi (2003) the unit therefore ensures that the provisions of the bank’s credit policy manual are complied with, adequate security provided and this will ultimately be repaid.



This department carries out from time to time the routine audit and supervision of the bank’s risk assets to ascertain approval and compliance with the terms and conditions of the various facilities.  Peter (1999) “The unit facilitated the detection of excess or above limit drawings, unauthorized credit and other related sharp and unwholesome practices.



Majekodunmi (2003) This department is responsible for resolving problem credit or loan.  Some financial institutions set up this department for transferring all problems loan or credit and assign professionals to manage them.  The non-performing credit, which have been resuscitated and are performing are transferred back to the originating units while those that cannot be revived are handed using different recovery/work-out strategies.  Such strategies may include loan restructuring, management, debt restructuring factory, enforcement and foreclosure.



The performance of a bank’s credit department shall be evaluated under the following headings as stated by Majekodunmi 92003).

1.                 Understanding the legal and regulatory framework guiding bank’s credit.

2.                 Knowledge of customer

3.                 Understanding the forms of credit facilities

4.                 Understanding the principles of lending

5.                 Credit documentation

6.                 Source of credit information

7.                 Credit review/supervision



Lending in banks are generally conducted in consonance with government fiscal and monetary policies as usually enunciated in annual budget, credit related issues contained in the monetary policy circular released by Central bank of Nigeria (CBN) and the statutory provisions embodied in the following documents.


1.       Companies and Allied Matters Decree (CAMD) 1990.

2.       Prudential guidelines of 1990, as amended subsequently

3.       Credit Risk management Systems (CRMS), CBN Credit Bureau as contained in Section 28(1) and 52 of the CBN Decree 1991.

4.       Bank and other Financial Institutions Decree (BOFID) No.25 of 1991 as amended thereto in 1997 and 2002.

5.       Code of banking practice by the Chartered Institute of bankers of Nigeria (CIB) and Money Laundering Decree No.3 of 1995.


Pandey (1988), the effectiveness of the credit department of a bank will to an extent be appraised as to the extent of their understanding and application of the legal system to credit application and appraisal.  A number of banks have been penalized by the regulatory authorities for non-compliance with the relevant legal and regulatory requirements.



In recent times, the CBN, NDLEA and other financial regulatory authorities, have become more aggressive in supervising the financial institutions, especially the banks and insisting on strict compliance with the ‘know-your-customers’ requirement before establishing any banking relationship with a person.  The CBN’s “know your customer” concept requires that financial institutions should not carry out or agree to carry out financial business or provide advise to a customer or potential customer unless they are certain as to who that person actually is.  To achieve the above objective, the CBN’s circular on ‘know your customer’ document stipulated that the following strategies should be put in place by financial institutions in the course of establishing banking relationship with a person or organization.

1.                 Avoid keeping anonymous accounts in obviously fictitious names.

2.                 Ensure that an agent is duly authorized by the claim principal.

3.                 Obtain information about the true identity of the person on whose behalf an account is opened or a transaction is conducted.

4.                 Carry out on going monitoring of accounts and transactions for the purpose of identifying transactions that fall outside the regular pattern of activities and ensure that all relevant information are obtained as quickly as possible I existing accounts.

5.                 Verify with Corporate Affairs Commission (CAC), the proof of incorporation of customers that are legal entities, customer’s legal validity, its structure, address, directors, memorandum and articles of association, and the customer’s business/activities.

6.                 Apply effective customer identification procedures and on going monitoring standards for telephone and electronic banking customers and proactively access various issues posed by emerging technologies.



According to the Nigerian Bankers (April – June 2003) spelt out that “A good credit department should understand the types of credit facilities that a customer might require.  The understanding of the type and characteristics of the different credit options will go a long way to facilitating the packaging of appropriate credit to meet various customers credit needs.


A customer might require one or a combination of the following credit facilities:

Ø Overdraft

Ø Leasing

Ø Trade finance

Ø Project finance

Ø Bankers acceptance (BA)

Ø Hire purchase

Ø Commercial paper


The product therefore, tied to the purpose for which credit is required would determine the categorization of lending to any of the under listed heading:

-                     Short-term working capital

-                     Interim loan

-                     Revolving loan against receivables and inventory

-                     Loan syndication (club lending)

-                     Government backed facilities e.g. ADB, NERFUND etc

-                     Term loan

-                     Long-term working capital



According to Pandey (1988), the performance of the credit department could also be required based on the extent of its understanding and application of the fundamental principles of lending.  Every lender has the challenging dual responsibilities of adequately and equitably serving the needs of the business customers on a day-to-day basis and that of profitability investing the bank’s funds on a safe and sound basis.  It is therefore noteworthy that for credits to meet the requirements of safety and soundness, it should be extended only to honest, capable, responsible individual and well-managed business firms having adequate capability to repay the loan from normal sources of business income.  A successful credit is only the credit that had been fully repaid.


According to Kurfi (2003) that all these principles can be taken care of by the use of 5Cs evaluation.  These 5Cs are:

1.       CHARACTER

This refers to the customers’ willingness to honour his obligation.  In practice the more factor is of considerable importance in credit evaluation.  The financial or credit manager can use past experience with the customer or gather information from sister organization that had previous experience with the customer to judge whether the customer will make honest effort to honour his credit obligation when due.




2.       CAPACITY

This refers to customer’s ability to pay what he owes when due, the ability can be gauged by appraising the customers past records and by observing his plant, machinery, stress business method and alike.


3.       CAPITAL

This means the general financial position of the customer as indicated by analysis of financial ratios trends in the banks cash and working capital.


4.       CONDITION

This refers to impact of the general economic trends on the customer or to specific development in certain sectors of the economy, which may affect the customer’s ability to meet his obligation.



This also refers to assets, which the customer may offer as pledge for security of the credit extended to him.  The financial or credit manager should be able to determine the real waste of the collateral vis-à-vis the credit to be extended to customers.



Pandey (1988) an effective credit department should know the sources through which independent information on credit requests could be obtained.  In addition to efforts by the credit department to hedge against bad loans, by imposing stringent conditions for new credits collecting various types of documentation, taking collateral etc, the department should go a step further to gather vital information on potential credit customers from independent sources.  Some of these sources are listed below:

1.       Information from the customer’s former or existing banks.  The information may reveal the borrowers indebtedness to other bankers, as well as status of the fictitious, i.e. whether they are performing or non-performing.


2.       Search at the CBN credit bureau the Credit Risk Management System (CRMS) on potential customers.


3.       A very good customer of the bank can introduce his friends on the basis of his own satisfactory relationship.  Where the introducing customer is of high integrity and moral standards his opinion about the requesting credit customer will most likely be respected.


4.       An existing non-credit customer who seeks credit may be considered based on his previous relationship with the bank, where his account has been property operated, in terms of level of activities, turnover and integrity of the account holder.


5.       An interview with the borrower and informal enquiries on him could reveal vital information that could aid the credit process.


6.       Management profile and ownership of the business can be verified at the company’s registry.


7.       The borrowing capacity of the company can be established from its memorandum and Articles of Association.


8.       The land registry is available for searches on title of properties pledged as security. The genuineness of such title can be confirmed at the land registry and the encumbered collaterals can be revealed.



Majekodunmi (3003) credit review is an important function of the credit department.  How well it performs in this area goes a long way to determining its effectiveness or otherwise.  It should be noted that good credit management could rarely overcome fair judgment in extending credit, but many good credits become problem credits because the credit department/officers did not heed the warning that arose over the life of the credit.



1.                 Absence of written credit policies

2.                 Absence of loan/credit supervision

3.                 Excessive reliance on collateral

4.                 Infrequent customer contact

5.                 Poor control on credit documentation

6.                 Excessive overdraft lending

7.                 Incomplete credit files

8.                 Failure to control and audit the credit process effectively

9.                 Over concentration of credit in one industry or sector

10.            Inadequate checks ad balance in the credit process

11.            Excessive centralization or decentralization of lending authority.

12.            Absence of portfolio concentration limits





1.                 It increases job opportunities, which enables individual house his talents for his own benefit and society to the fullest.

2.                 according to Boreham et al, credit enhances the transfer of purchasing power and this enables borrowers to have funds necessary for the purchase of goods and services, which they need for the acquisitions of capital equipment for productive operations. 

3.                 Credit enables the entrepreneur to increase his total surplus value, by an amount greater than interest due.

4.                 Creation of money, in the process of lending commercial banks create money by creating liability in the form of demand deposits against themselves in favour of the debtor.

5.                 It turns the economy around; credit is a powerful instrument that could be employed by the monetary authorities to achieve macro-economic objectives of full employment, price stability and balanced growth.


It is pertinent to note that despite the above advantages of credit as a catalyst in the development of an economy, credit could as well be dislocation or dysfunctional to the growth of the economy.  This happens when proper care is not taken.  Such effects is discussed below:



1.                 It could fuel inflation and classical economists describe it as money getting out of order.

2.                 It could leads to bad and doubtful debts.



When the credit of a bank goes bad, the credit officer should take the following steps:

i.        Analyze the borrowers problem

ii.       Consult with the bank’s management and the unit that specializes in credit recovery.

iii.      Recommend adverse classification and suspension of interest accrual if warranted.

iv.      Gather information on total institutional exposure to borrower.

v.       Monitor account activity daily for overdrafts.

vi.      Review credit documentation, guarantees, notes, collaterals and hypothecation agreements.

vii.     Study the utility of taking security if unsecured.

viii.    Establish a work out plan for corrective action.



First Bank of Nig. Plc, for over a century has distinguished itself as a leading banking industry /institution and a major contributor to the economic advancement and development of Nigeria.


Founded in 1894 by a shipping magnate from Liverpool, Sir Alfred Jones, the bank commenced as a small operation in the office of Elder Dempster and Company in Lagos.


The bank was incorporated as a Limited Liability Company on March 31, 1894, with Head Office in Liverpool.  It started business under the corporate name of the Bank for British West Africa (BBWA) with a paid-up capital of 12,000 pounds sterling after absorbing its predecessor, the African Banking Corporation, which was established earlier in 1892.  This signaled the pre-eminent position which the bank was to establish in the banking industry in West Africa.  In the early years of operations, the bank recorded an impressive growth and worked closely with the colonial government in performing the traditional functions of the Central bank, such as issue of specie in the West Africa sub region.


To justify its West Africa Coverage, a branch was opened in Accra, Gold Coast (now Ghana) in 1896 and another in Freetown, Sierra Leon in 1898.  These marked the genesis of the Bank’s International banking operations.  The second branch of the bank in Nigeria was in the old Calabar in 1900 and two years later, services were extended to Northern Nigeria.


Currently with over 365 branches spread throughout the federation, the bank maintains the largest branch network in the industry.


To satisfy the needs of its customers, First Bank has diversified into a wide range of banking activities and services.  These include corporate, retails and Mortgage banking, registrarship, Private Equity Financing, Trusteeship and Insurance Brokerage.  In addition, as part of its strategy of progressive internationalization, in November 2002, the bank became the first financial institution in Nigeria to establish a subsidiary bank in the United Kingdom.


Over the years, the bank has experienced phenomenal growth.  With a share capital of N55.6 million in 1980, the bank’s share capital grew to N2000 billion as at March 2005.  The bank’s market capitalization stood at over N100 billion i.e. N30/share as at 31st March 2005.


To reposition and to take advantage of opportunities in the changing environment, the bank embarked on several restructuring initiatives.  In 1957, it changed its name from Bank of British West Africa to bank of West Africa.  In 1969, the bank was incorporated locally as the Standard bank of Nigeria Limited in line with the Companies Decree of 1968.


Changes in the name of the bank also occurred in 1979 and 1991, to First Bank of Nigeria Limited and First bank of Nigeria Plc, respectively.  In 1985, the bank introduced or decentralized structure with five regional administrations.  To further enhance the bank’s operational efficiency, this was reconfigured into sixteen Area Offices in 2003.  In 1996, the bank introduced the FBN Century – 11 Project, and revalidated in 2001 under the name Century II, the new Frontier, to revolutionize its operations in with the dynamics of the environment.  In view of the foregoing, it was therefore, a natural progression when in 2001; the bank began the process of transforming its corporate identity to reflect its rejuvenated focus.  The brand transformation process, which began in earnest in 2001 gained momentum in 2003 and was launched of Tuesday, April 27, 2004 with the introduction of a new corporate identity.


First Bank of Nigeria Plc got listed on the Nigerian Stock Exchange (NSE) in March 1971 and has won the NSE President’s Merit Award ten times for the best financial report in the banking sector.


The bank has continued to be a leader in financing long-term development of the economy, which was demonstrated in 1947 when the first long-term loan was advanced to the then Colonial Government.  To demonstrate its commitment to its customers and the development of the Nigerian economy, the bank has since broadened its loan and credit portfolio to various sectors of the economy.


The bank has improved tremendously judging from a number of parameters including number of branches, growth in deposit base, asset size and size of loans and advances.


Furthermore, its track record of profitability and reliability in sound banking has continually place the bank in its leadership position.



One of the utmost importance of a bank is to make sure its credit meet regulatory standards and are profitable as to establish a concrete credit policy.


First Bank of Nigeria Plc adopt some important elements of a good credit policy which includes the following:

1.       First Bank of Nigeria adopt lines of Authority which should recognize the roles of the Board of Directors and various committee of the board, outline the duties and responsibilities of the Chief Executive Officer and Head of Credit state clearly the lending authority/ limits of every credit officer.


2.       It also adopt credit criteria, credit criteria should be clear credit that are acceptable and which are not, outline credit factors to be considered in making loan factors to be considered in making loan decision list acceptable, collateral state tenure/materials and condition for renewal, extension or entrancement.


3.       First Bank of Nigeria makes presentation of policies and procedures for setting loan interest and fees and terms for repayment of loans.


4.       First bank of Nigeria Plc adopt procedure and controls for checklist regarding what information and documentation that would be maintained in credit files, set standards for loan supervision and reporting of bad loans.


5.       They set up guidelines for taking, evaluating and perfecting loan collateral.


6.                 They try as much as possible to follow all the procedures for

compliance with regulation.


7.       The have procedure for periodic review of credit policy.







The population of the study used in the course of this research is centered on First bank of Nigeria Plc, Kano with emphasis on First bank Nigeria Plc, Kano, Zoo Road Branch and department of credit management.


The population includes both men and women over 8000 employees in the whole branch of First Bank Plc.  The bank is fully indigenized with top management manned by Nigerians as well as the composition of the board of directors within the last decade.


3.2            SAMPLE SIZE

The sample size used is from Credit Management Department, First bank Nigeria Plc, Zoo Road, Kano.






The methods used for the purpose of carrying out this research work are both primary and secondary sources of data collection, which are as follows:


This is the first hand information search obtained through:

i.        Personal interview: This is one of the widely used methods of data collection.  It is a face-to-face dialogue between researcher and the respondents (staff of First Bank Nigeria Plc).


ii.       Questionnaires:  This is a written question by the research requiring respondent to respondent to respond by filling the paper.



The secondary source of data on the hand was obtained through the review of some related writing and other researches by other researchers or authors.  The sources of this data are textbooks, journals, official records etc.



The technique used to analyze the data is by simple percentage and theoretical analysis.


4.0            INTRODUCTION:

This chapter dealt with the presentation of analysis and interpretations of data.  The data were presented showing the frequency of responses and percentage it presented.



















Source:  Survey 2005

The table above shows that 75% of the respondents at the credit department were male while 25% of them were female.

This implies that majority of the employees are male.

          Table 2:   APPROVAL  OF LOAN














Source:  Survey 2005



The table shows that 16 respondents which represent 80% of the total percentage are of the view that loans are approved from the Head Office, while 4 respondents which represent 20% says loans are approved from the branch office.  This indicate that approval of loan is strictly limited to the Head office which shows that the management is effective and efficient.

Table 3:   Are collateral securities and guarantors effective tools in granting and managing loans facilities














Source:  Survey 2005

From the questionnaire, 19 respondents which represent 95% agreed that collateral securities and guarantors are effective tools in granting and managing loans facilities while 1 respondents which represent 5% disagreed.

This indicate that collateral security is the most important tool of credit management and it implies that it is effective in credit management department of First Bank Nig. Plc., Zoo Road, Kano.

Table 2:  Do debtors settle their debt promptly?














Source:  Survey 2005

The table shows that 16 respondents which represent 80% accepted that debtors settles their debt as at when due while 4 respondent which represent 20% said debtors don’t settle their debt as at when due.

This implies that with 80% agreeing that debtors settle their debt when due means that the debtors are reliable and will be given credit when needed because of their faithfulness.

Table 5:  Is bad and doubtful debt caused by mismanagement of credit facilities














Source:  Survey 2005


The table shows that 4 respondents which represent 20% said that bad and doubtful debt are caused by mismanagement of credit facilities while 16 respondents representing 80% disagreed.

This implies that mismanagement of credit facilities is not caused by bad and doubtful debt.

Table 6:  Do they employ the services of qualified staff in credit department














Source:  Survey 2005

Most of the staff in credit department are qualified staff based on the response from the respondents where 16 respondents representing 80% agreed that there are qualified staff and 4 respondents representing 20% said that there are non-qualified staff.

This implies that with good qualified staff there would be proper management of credit, knowing fully well the facilities needed.

Table 7:  Is the provision of collateral security effective and sufficient in granting loans facilities?













Source:  Survey 2005

From the table, 14 respondents which represent 70% accepted that provision of collateral security is effective and sufficient in granting loan facilities while 6 respondents which represent 30% disagreed.

This implies that provision of collateral security is very effective  and sufficient in granting loan facilities in the credit management.

Table 8:   Is adequate training given to the staff of the bank













Source:  Survey 2005

The table shows that 15 respondents which is 75% agreed that adequate training is given to the staff of the bank (credit management department) while 5 respondents which represent 25% disagreed.  This implies that adequate training is given to the staff of the bank.

Table 9:  Is loan facilities recovered through litigation process?














Source:  Survey 2005


From the table, 13 respondents representing 65% accepted that loan facilities are recovered through litigation process while 7 respondents representing 35% disagreed.

This implies that majority of the loan facilities are recovered through litigation process.

Table 10:   Do you think we can control the problems of credit management?













Source:  Survey 2005

The table shows that 75% representing 15 respondents agreed that credit management problems can be controlled while 25% representing 5 respondents disagreed.

          This implies that credit management problems can be controlled.


4.2            TEST OF HYPOTHESIS:

The hypothesis formulated in chapter one (1) is going to be tested here one by one based on the analysis.



H1:   Loans are approved from the bank’s head office.

Ho:   Loans are not approved from the bank head office.

With regards to the discussion and analysis, it was discovered that loans are approved from the bank head office, therefore alternative hypothesis which states that loans are approved from the bank head office is valid and accepted, while the null hypothesis is not tenable and hereby rejected.  This was further buttressed in Table 2 where 16 respondents representing 80% agreed that loans are approved from the head office and 20% disagreed.


H1:   Customers settles their debt when it is due.

Ho:   Customers do not settle their debt when it is due.

From the analysis, it was discovered that customers settles their debt when due.  Therefore alternative hypothesis is valid and accepted while the null hypothesis is not valid and hereby the rejected.

This can be seen in table 4 where 16 respondents representing 80% agreed that debtors settles their debt when due and 20% representing 4 respondents disagreed.





H1:   The banks have adopted some measures to recover credit facilities.

Ho:   The banks have not adopted some measures to recover credit facilities.

From the analysis, it was discovered that the banks have adopted some measures to recover credit facilities, hence alternative hypothesis which said that banks have adopted some measures to recover credit facilities should be accepted and the null hypothesis to be rejected.

This can be seen in Table 9 where 13 respondents representing 65% were in support of the bank adopting some measures to recover credit facilities and 7 respondents representing 35% disagreed.






5.1            SUMMARY:

The research work was focused on credit management in Nigerian Commercial Banks with First Bank Nig. Plc. as the case study.  The research was carried out through the conducting of interviews and prepared questionnaires to the employees of credit department of First Bank Nigeria Plc., Kano Branch, Zoo Road, Kano.  The main aim of the research work has been to appraise how Nigerian Commercial Banks manages credit and how to identify the strategies taken by the banks particularly First Bank Nig. Plc. to minimize if not eliminate such bad and doubtful debts.

Chapter one contains the preliminaries aspects of the chapters.  Specifically, it deals with the introduction to the subject, statement of the problem, objectives of the study, Hypothesis and questions, significance of the study, scope of the research, limitations of the study and definitions of key terms.

Chapter two deals with the review of relevant literature from different authors as related to the appraisal of credit management strategies in commercial banks.

Chapter three is concerned with the research methodology which comprises of the population of the study, sample size, data collection method which comprises of primary and secondary sources, method of data analysis.

Chapter four focused on the presentation and analysis of data as well as testing of hypothesis.

The project was concluded with summary, conclusions, recommendations and also references to various books used.


5.2            CONCLUSION:

With careful observations, interviewing, collection of data, presentations and analysing, the study revealed that from the test of hypothesis.  Approval of loan from the head office, settling of debts by the debtors as at when due and also adoption of some measures by the Banks to recover credit facilities has really help and improve the management of credit in the credit department of First Bank Nig. Plc., Zoo Road, Branch Kano.

Through settling of debts as at when due can also increases sales volume and profitability.  It will also enable the debtors to get more loans as at when needed since they kept to their promise and this can also turn their economy around.

Therefore, the alternative hypothesis should be accepted while the null hypothesis should be totally rejected.

5.3            RECOMMENDATION:

The growth of First Bank Nig. Plc., Zoo Road, Branch, will largely be dependent on effective and efficient management if the following suggestions are taken into consideration so as to achieve their future economy goal:

1.                 They should avoid by all means, mismanagement of credit facilities so as to curb bad and doubtful debts.

2.                 They should endeavour to employ the services of qualified staff in credit department.  That is to say that, virtually all the staff should be qualified employees.

3.                 There should not be excessive reliance on collateral.

4.                 They should increase the level of their collateral security so as to enable all debtors to settle their debts when due.

5.                 There should be strict supervision and spot checking from time to time to ensure good credit management system.

6.                 There should be perfection and verification in their provision of collateral security and guarantors so as to enable the bank easily recover in the event of default.

7.                 There should be increment in the level of training given to their staff.

8.                 There should be increament in the number of staff at the credit department level.

9.                 Also, female employees should be increased.

10.            There should  be improvement on approval of loan.  That is to say, there should be total approval of loan from the bank head office.

11.            There should be improvement in frequency of customer contact.

12.            There must be full compliance of rules and regulations adopted by Central Bank of Nigeria and other financial statutes over debts.  Therefore, banks must recruit an honest, dedicated and responsible employees in order to achieve their goal.










Abayomi O.M. (1999): Performance Evaluation of Banks Credit Department”.  The Nigerian Bankers, Journal of Chartered of Bankers of Nigeria.  pp. 6-14.


Annual Report and Account (2003):        Union Bank of Nigeria Plc. Published by Academy Press Plc., Lagos.


Daniel, K. (1981):         “A Bankers Approach to Business Loan” Published.


Edward, W. F. (1963): “The Development of Numerical of Credit.


Kurfi, A. K. (1999): Principles of Financial Management Bench Mark Publishers Limited N.29 AKCC Business Complex, Aminu Kano Way, Goron Dutse, Kano pp.116-117.


Pandey, I. M. (1988): “Financial Management”.  Vikas Publishing House Pvt. Ltd., New Delhi. pp. 375-380.      


Peter, S. R. (1999): Commercial Bank Management McGew International Publication Ltd. 








Please tick the option provided appropriately.  Yes  [     ]     No   [      ]

1.                 Are loans approved from the Bank Head Office?

Yes  [     ]     No   [     ]

2.       Are collateral securities and guarantors effective tools in granting and managing loans facilities? Yes  [     ]     No   [      ]

3.       Do debtors settle their debt promptly? Yes  [     ]     No   [      ]

4.       Is bad and doubtful debts caused by mismanagement of debt facilities? Yes  [     ]     No   [      ]

5.       Do they employed the service of qualified staff in credit department?

          Yes  [     ]     No   [      ]

6.       Is the provision of collateral security effective and sufficient in granting loans facilities? Yes  [     ]     No   [      ]

7.       Is adequate training given to the staff of the bank? Yes  [     ] No [      ]

8.       Is loan facilities recovered through litigation process?

Yes [       ]    No [      ]

9.                 Do you think we can control the problems of credit management?

Yes [       ]    No    [         ]   

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