Interest Rates and Deposit Money Banks' Profitability Nexus : The Nigerian Experience

S. Samuel Ogunbiyi; Peters O. Ihejirika

doi:10.12816/0016525

Article Details

Interest Rates and Deposit Money Banks' Profitability Nexus : The Nigerian Experience

Authors:

S. Samuel Ogunbiyi | Peters O. Ihejirika

Publisher:

Sohar University

Main Topics:

Economics and Finance

Journal:

Oman Chapter of Arabian Journal of Business and Management Review 2014 Vol.3 Issue 11, pp.133-148

Document Type:

Article

Publication Date:

6/2014

Document Language:

English

Document ID (Org No.):

72748

Frequency:

Monthly

pISSN:

22235833

DOI:

10.12816/0016525

Descriptors:

Keywords:

Abstract:

 This study examined how interest rates affect the profitability of deposit money banks in Nigeria.The study was based on country aggregate level annual data that covered a period of thirteenyears 1999 to 2012 and made use of multivariate regression analysis under an econometricframework. The Augmented Dickey and Fuller unit root test results indicate that the series areeither I(0), I(1) or I(2) stationary. The estimated results show that Maximum lending rate, RealInterest rate and Savings deposit rate have negative and significant effects on the profitability ofNigerian deposit money banks as measured by return on assets at the 5% level of significance.Also, the study found that Real interest rate at the 8% level of significance has negative andsignificant relationship with Return on Equity of money deposit banks in Nigeria. On the otherhand, the study found no significant relationship between interest rate variables and Net InterestMargin of Deposit Money Banks in Nigeria. The implication of the findings of this studysuggests that the profitability of the banking sector is a function of changing interest rates. Thestudy therefore recommends that government should adopt monetary policies that will helpNigerian deposit money banks to improve on their profitability and there is need to review andstrengthen bank lending rate policies through effective and efficient regulation and supervisoryframework. Banks can improve their profitability through charging moderate lending rates asagainst maximum rates as their circumstances may allow. Furthermore, the managers of moneydeposit banks are expected to create the conditions for an efficient banking system devoid ofinformation asymmetry to adapt to changing macroeconomic variables of interest rates andinflation. Banks’ management must efficiently manage their portfolios in order to protect thelong run interest of profit-making.

Article Details

Interest Rates and Deposit Money Banks' Profitability Nexus : The Nigerian Experience

Authors:

S. Samuel Ogunbiyi | Peters O. Ihejirika

Publisher:

Sohar University

Main Topics:

Economics and Finance

Journal:

Oman Chapter of Arabian Journal of Business and Management Review 2014 Vol.3 Issue 11, pp.133-148

Document Type:

Article

Publication Date:

6/2014

Document Language:

English

Document ID (Org No.):

72748

Frequency:

Monthly

pISSN:

22235833

DOI:

10.12816/0016525

Descriptors:

ECONOMIC POLICY

INTEREST RATES

BANK DEPOSITS

PROFITABILITY

ECONOMIC ASPECTS

NIGERIA

Interest Rates

Deposit Money Banks

Profitability

Issues

Article Details

Authors: S. Samuel Ogunbiyi | Peters O. Ihejirika

Publisher: Sohar University

Main Topics: Economics and Finance

Journal: Oman Chapter of Arabian Journal of Business and Management Review 2014 Vol.3 Issue 11, pp.133-148

Document Type: Article

Publication Date: 6/2014

Document Language: English

Document ID (Org No.): 72748

Frequency: Monthly

pISSN: 22235833

DOI: 10.12816/0016525

Descriptors:

Issues

Authors:

S. Samuel Ogunbiyi | Peters O. Ihejirika

Publisher:

Sohar University

Main Topics:

Economics and Finance

Journal:

Oman Chapter of Arabian Journal of Business and Management Review 2014 Vol.3 Issue 11, pp.133-148

Document Type:

Article

Publication Date:

6/2014

Document Language:

English

Document ID (Org No.):

72748

Frequency:

Monthly

pISSN:

22235833

DOI:

10.12816/0016525