Bad Debt – The Effects and the Way Out

Bad Debt – The Effects and the Way Out

There are number of impacts on the Nigeria economy as a consequence of the non-performing loans. Some of the effects are briefly discussed below:

1. There has been serious cut-off in the importation and refusal to accept letter of credit. This has seriously affected international trade and importation of stocks into the country.

2. There has been serious problem of trust in the banking sector by the customers. Many could no longer feel free to go to bed since they don’t know what will happen to their money.

3. There is high credit risk and it is a high possible risk if not quickly addressed

4. There is the problem of low wealth and poor development levels and these have currently encumbered Nigeria as a whole.

5. This problem has also led to job loss. Most edges are forced to relief some of their personnel of their jobs.

6. With the problem of inter-banking transaction, there has been shortage of liquidity and acute shortage of credit.

7. Most edges now suffer from what could be described as cash drain as customers are withdrawing their money.

8. There are also high fluctuations in stock market development.

9. Most edges are characterized with ‘corporation financial loss’ as a consequence of the

bad loans.

10. Of importance is also the de-cumulation of foreign reserves and pressure on

exchange rate i.e. deprecation.

11. Also, there is the problem of uncertainty in the industry-banking sector.

12. Lastly, the economy is faced with a credit squeeze.


This work has within its capacity dealt extensively with the current national and common issue of non-performing loans and its effects on the edges and economy at large. This work took-off by explaining deeply the concept of banking and bad debt in relevance to current issue.

The causes of bad debt are also explained while cognizance is also given to the effects of the non-performing loans (bad debt) on the edges and the Nigerian economy.

The issue could not be looked into in its wider perspective due to contract of time and space, however, justice has be done to the topic


The issue of non-performing loans and the Nigerian edges is a topical one, not only at the national level but also at the global issued. Experts and observers have ever sine been watching with careful how this has been affecting business globally. It has been established here that there is the problem of non-performing loans and also that this problem has caused serious upsetting challenges in all national spheres. However, some measures are suggested here as a way of curbing future recurrence of such in the future.


It is believed that if these points are properly considered, it could be good ways of saving the nation from its present situation and further stop future recurrence.

i). The CBN to see to proper administration of edges by formation more viable regulations and monitoring plans.

ii). edges are expected to have time tested trusted and competent MD’s to enhance good corporate governance.

iii). The ministry of finance should work out modalities for enhance edges transparency and avoidance of shady bank practices.

iv). edges should continue compulsory save for uncollectible accounts.

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