AN EVALUATION OF CREDIT MANAGEMENT AND THE INCIDENT OF BAD DEBT IN NIGERIA COMMERCIAL BANK

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
Banks
Government
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