NEXUS BETWEEN RISK MANAGEMENT IN MARKETING OF FINANCIAL SERVICES AND PERFORMANCE OF COMMERCIAL BANKS IN NIGERIA

Abstract

This study examined the effect of risk management on the financial performance of deposit money 
banks in Nigeria. Specifically, the study investigated the effects of credit risk, liquidity risk, market 
risk, and capital risk on the return on assets (ROA) of deposit money banks in Nigeria. The study was 
anchored on Modern Portfolio Theory developed by Markowitz (1952), which emphasizes risk 
diversification and the optimization of risk-return trade-offs. An ex-post facto research design was 
adopted, and secondary data covering the period 2000–2023 were obtained from the Central Bank of 
Nigeria Statistical Bulletin and Nigeria Deposit Insurance Corporation reports. Data were analysed 
using descriptive statistics and Ordinary Least Squares (OLS) regression techniques. The findings 
revealed that credit risk exerted a positive but statistically insignificant effect on return on assets. 
Liquidity risk had a negative and insignificant effect on return on assets. Market risk showed a positive 
but insignificant effect on return on assets. However, capital risk exhibited a positive and statistically 
significant effect on return on assets. The study concluded that effective risk management remains a 
critical determinant of bank performance, with capital adequacy playing the most influential role in 
enhancing profitability. The study recommends that deposit money banks should strengthen their credit 
appraisal systems, improve liquidity management frameworks, enhance market risk monitoring 
mechanisms, and maintain adequate capital buffers in compliance with regulatory requirements to 
improve financial performance and ensure long-term stability.