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1.1        Background of the study

1.2        Statement of problem

1.3        Objective of the study

1.4        Research Hypotheses

1.5        Significance of the study

1.6        Scope and limitation of the study

1.7       Definition of terms

1.8       Organization of the study




3.0        Research methodology

3.1    sources of data collection

3.3        Population of the study

3.4        Sampling and sampling distribution

3.5        Validation of research instrument

3.6        Method of data analysis



4.1 Introductions

4.2 Data analysis


5.1 Introduction

5.2 Summary

5.3 Conclusion

5.4 Recommendation








This study is on credit management and issues of bad debt in commercial banks in Nigeria. The total population for the study is 200 staff of Union bank in Akwa Ibom state. The researcher used questionnaires as the instrument for the data collection. Descriptive Survey research design was adopted for this study. A total of 133 respondents made human resource managers, accountants, marketers and customer care officers were used for the study. The data collected were presented in tables and analyzed using simple percentages and frequencies







1.1 Background of the study

In a modern economy, there is distinction between the surplus economic units and the deficit economic units and inconsequence a separation of the savings investment mechanism. This has necessitated the existence of financial institution whose jobs include the transfer of  funds from savers to investors. One of such institution is the Commercial banks, the intermediating roles of the Commercial Banks places them in a position of “trustees´´ of  the saving of the widely dispersed surplus economic units as well as the determinant of the rate and shape of the economic development. The techniques employed by bankers in this intermediary function should provide them with perfect knowledge of the outcomes of lending such that funds will be allocated to investments  in which the probability  of full payment is certain. However, in practice no such tool can be found in the decision of the lending banker. Virtually all lending decisions are made under creditors on uncertainty. The risk and uncertainty associated with lending decision, situation are so great that the concepts of risk and risk analysis need to  be employed by lending bankers in order to facilitate sound decision-making and judgement. This statement implies that if risks are to be objectively assessed, lending decisions by the Commercial Banks should be based less on quantitative data and more on principles too subjective to provide sound and unbiased judgement. Furthermore, the banks depend heavily on historical information as a basis for decision making.  Apparently aware of the inadequacies of his decisions base, the lending banker has often sought solace in tangible and marketable assets as security giving the impression that lending against such securities is an insurance against bad debts. This makes the banker complacent with his loan portfolio. The increasing trend of provisions for bad and doubtful debts in most Commercial Banks is a major source of concern not only to management but also to the shareholders who are becoming more aware of the dangers posed by these debts. Bad debts destroy part  of the earning assets of banks such as loans and advances which  have  been described as the main source of earning and also determines the liquidity  and solvency which generate two major  problems, That is profitability and liquidity, has to earn sufficient income  to meet its operating costs and to have adequate return on its investments.


The problem for this study is to appraise the lending and credit management policies of a typical Commercial bank (the Union bank of Nigeria Plc) with a view of finding the causes, consequences of bad debts in banks. Year after year, banks suffer much from the part of full loan extended which has for one reason or the other proved unrecoverable. Banks lose millions of Naira in various bad debts yearly and despite efforts by bank management, committee of chief inspectors and the bankers committee on the other hand, the wave of bad debts in banks is still on alarming proportion. This is gathered from a combination of literature reviews on the topic. On the other hand, many banks experienced a lot of bad debts when the new government abandoned the project awarded to the contractors by civilian government. These contractors borrowed to execute the project awarded to them but could not repay the loan, due to government action on revamping the economy thereby abandoning the project. Other experiences were during the time of draught or poor rainfall and pest. These however  led to low harvest  which did not give the farmers enough  time to repay their debt. Again, experience may arise in respect of lapses on the part of the bank’s credit officers. For instance, there may be excesses over approved facility, unformatted facilities and expired facilities not renewed on time. In each of these cases the customer may easily deny even owing the bank all or part of the amount Money deposit banks have always borne the burden alone, but this may not continue in future as the banks may be unable to take the risk of lending more but when eventually they do, they would seek the best way they come out of the risk with a realistic reward which they are clearly failing to achieve at present.


The objectives of the study;

  1. To determine and appraise the lending procedure of banks using Union bank of Nigerian plc as a case study-with a view to highlighting the effectiveness and adequacy or otherwise  the credit management policy of Nigerian banks in reducing the occurrence and consequences of bad debts.
  2. To highlight the  rate at which inadequate collateral security provision by borrowers increases the issues of bad debt in Nigerian.
  3. To determine whether fund diversion has any effect on bad debt of Commercial Banks in Nigeria.
  4. To ascertain the extent to which government intervention in lending policies of Commercial Banks has influenced bad debts in Nigerian Commercial Banks.
  5. To highlight the extent to which improper project evaluation influence bad debt of Commercial Banks in Nigerian.


Ho: inadequate collateral provisions by borrowers do not increase the issues of bad debt in Union bank of Nigeria plc.

Hi: Inadequate collateral provisions by borrowers increases the issues of bad debt in Union Bank of Nigeria.

Ho: Fund diversion does not affect bad debt in Union Bank of Nigeria Plc.

Hi: Fund diversion affects bad debts in Union Bank of Nigeria Plc.




It is hardly an exaggeration that the difference between the success and the failure in the banking industry is in the effective management of the bank’s loans and advance. Efficient loan management is vital to the protection of assets and the achievements of adequate returns to investment. Though much work abound in the literature  of the technique of lending, the methods of securing such lending and the pitfalls that await the  unwary banker. By comparison it appears to be very little in point on the subject of loan management and recovery.  A study of this subject will therefore be a welcome addition to the existing volume of banking literature. Effective loan management recognized that beyond the application of sound banking principles whenever a loan is made, there is need for urgency in appreciating the point when a loan begins to look doubtful, in arriving at a decision as to the appropriate action and in taking that action. This will enable the bank  to at least obtain full payment including accrued interest  or at worst to mitigate the capital loss in the face of increased competition among banks, future profits are likely to be harder to come by and since bad debts are a charge against profits, it is appropriate that we review the methods, proportions and margins of lending to bad and doubtful debts.  Hence the significance of this study to bankers will enable them to appreciate an appraisal  of their lending and control mechanism now that they are expected to lend under tight monetary conditions. The economy as a whole will benefit from the study because if the level of bad debts is reduced, banks will be left with more profits to enable them make the expected contributions to the development of the economy.


In the study of credit management in Nigeria, Union Bank of Nigeria Plc was used for my analysis. All references therefore relate to Union Bank of Nigeria plc. The limitations of this study include some of unavoidable constraints and problems encountered in the process. They are as follows:

  1. i)   FINANCE: The problem of finance was not left out in the course of research to this study. This type of study required adequate money and time to enable the researcher visit the necessary places for collection of data. Insufficient fund hindered an in-depth study of this research since it was financed from meager pocket money of the researcher.
  2. ii)   NON-AVAILABILITY OF RECORDS: This is one of the most important limiting factors in the course of the study. This includes the problems of easily getting the appropriate data due to bureaucracy which hinders the information flow in the country.

iii)  NON-CHALLANT ATTITUDE OF BANK OFFICIALS: The reluctance of bank officials to reveal information on the need for this study, for fear of breach of duty of secrecy to customers exposure of banks administrative short-comings.

  1. iv)   IGNORANCE OF RESPONDENT /BORROWERS: Most bank customers were semi-illiterates and most often it was very difficult to collect adequate data required from them.
  2. v)    TIME: Since this study is one of the many courses offered by the researcher, the researcher was constrained by time to carry out an indent research on the study.





DEBT: This is what one owes to another person.

LOAN: A Loan is a credit arrangement, a security is pledged and must be repaid with interest over a stipulated period of time.

OVERDRAFT:  This is a credit arrangement by banks to their customer to withdraw money over and above that what he has in the account.

DEFAULT:  This means failure to pay one´s debt for credit extended which has fallen due.


This research work is organized in five chapters, for easy understanding, as follows

Chapter one is concern with the introduction, which consist of the (overview, of the study), historical background, statement of problem, objectives of the study, research hypotheses, significance of the study, scope and limitation of the study, definition of terms and historical background of the study. Chapter two highlights the theoretical framework on which the study is based, thus the review of related literature. Chapter three deals on the research design and methodology adopted in the study. Chapter four concentrate on the data collection and analysis and presentation of finding.  Chapter five gives summary, conclusion, and recommendations made of the study.


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