Risk Management and Project Appraisal in Nigerian Banking Industry -- Theory versus Reality

D., Ayodele Thomas
August 2012
Journal of Emerging Trends in Economics & Management Sciences;Aug2012, Vol. 3 Issue 4, p375
Academic Journal
One of the major tasks being faced by the management of corporations is how to make optimum investments decisions. These decisions are surely not without their associated risks. The purpose of this paper is to investigate whether Nigerian banking firms practically take risk analysis into consideration when appraising their investments as compared to what exist in finance literature, and examine some risk analytical methods being used by management teams of firms and how the use has affected the firms' investment performance. Primary data were collected through the use of questionnaires served to workers of 5 banks representing the sample selected out of the Nigerian banks. The data were analyzed using the simple percentages and chi -- square (x²) to test the two hypothesis formulated for the study. It was observed from the findings that Nigerian banks make use of risk analytical techniques in their investment appraisal. It was also discovered that some risk analytical techniques are more popular in use than others among the users and that effective evaluation of risk plays a major role in enhancing investment performance. It is therefore recommended among others that: workers at management level should be educated on the importance of risk evaluation techniques in order to maximize returns on their shareholders investment. Also to be more dynamic in the use of various risk analytical methods depending upon the conditions so as to guarantee high returns.


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