CAUSES AND IMPLICATION OF BAD DEBT IN NIGERIA COMMERCIAL BANKS

1.0INTRODUCTION  1.1BACKGROUND OF THE STUDY  Bad debt can be define as those credit facilities that banks grant to its customers, but for some inherent weaknesses, the full or part thereof can not be recovered due to creditors (banks), but full recovery of such debt is considered impossible.  Bad debt can also be looked at as credit granted to the customers of the bank with very slim chance of recovering it. The reason why this topic is of interest is that most of our banks are in the state of financial distress which is as a result of high degree of “problem loans” or simply bad debts.  In addition, there has been as discrepancy between the public expectations and what is actually the liquidity and profitability positions of the high percentage of problem loans to the over all loans granted by these banks.  I then consider this project as a plate form to investigate the major causes of bad debts in our commercial banks.  The worthiness of this study is based on the fact that it will go a long way in x-raying the major cause(s) of bad debts in our commercial banks.  After this/these major cause(s) has/have been revealed, the solution to the problem will no longer be far –fetched.  The impact is that both the solvency or liquidity and profitability if these banks shall tremendously improve. The implication of bad debts on our commercial banks and economy generally can never be positive one.  Apart from highlighting these implications, that study will make effective recommendations that when applied, the highlighted implications shall be remedied.
2.0REVIEW OF RELATED LITERATURE In order to effectively dictate that causes and implications/ effects of bad debts in Nigeria commercial banks, it is imperative that we adequately review some related studies that were previously carried out by other researchers.  Reviewing the writing of recognized authorities in this topic or related ones would also be of help.  We shall also discuss relevant theories in this discipline (Banking and Finance) that related to the causes and effects of bad debts in commercial banks.My intention of reviewing the previous studies is to dictate some left out or to portray new discoveries the previous researcher did not notice.