Journal of African Studies and Sustainable Development

This study aims to evaluate the impact of credit appraisal and credit terms on the ?nancial performance of commercial banks in Nigeria. Utilizing a descriptive and ex post facto research design, panel data was collected from annual ?nancial reports of 12 purposefully selected Nigerian commercial banks from 2013 to 2022. The study used a Random Effect Model (REM) for regression analysis, as indicated by the Hausman test. The results demonstrate a signi?cant positive relationship between credit terms (Average Loan Maturity, ALM) and ?nancial performance (Return on Assets, ROA), and a signi?cant negative relationship between credit appraisal (Non-Performing Loans ratio, NPL) and ROA. Firm size and liquidity also positively in?uence ROA. In conclusion, credit terms with longer maturities enhance the ?nancial performance of banks, while higher non-performing loans negatively impact performance. The study recommends that banks should consider extending loan maturities to improve pro?tability and strengthen credit appraisal processes to minimize nonperforming loans, thereby enhancing overall ?nancial performance.

Open Full Text (PDF)