An Analysis of Credit Risk Management and the Financial Performance of Deposit Money Banks in Nigeria: An ARDL Analysis of Access Bank Plc, Nigeria

This study examines the short-run and long-run effects of credit management on the financial performance of Nigerian commercial banks from 2015 to 2025. Using an Autoregressive Distributed Lag (ARDL) model, the analysis incorporates key credit risk indicators; NonPerforming Loans (NPLs) and Loan Loss Provisions (LLPs) alongside macroeconomic variables such as inflation and exchange rate. The findings reveal that NPLs and LLPs exert significant negative effects on Return on Assets (ROA) and Return on Equity (ROE) in both the short and long run, demonstrating that deteriorating asset quality and rising provisioning burdens weaken bank profitability. Macroeconomic variables show mixed effects: inflation negatively influences long-run profitability, while exchange-rate depreciation exhibits a positive but context-dependent impact on performance. The error-correction terms confirm a stable adjustment toward long-run equilibrium. Diagnostic tests further validate the robustness of the model. Overall, the study concludes that effective credit management is essential for strengthening bank performance in Nigeria. It recommends enhanced loan screening, stricter compliance with prudential guidelines, improved monitoring systems, and policy efforts to stabilize inflation and exchange-rate volatility.