IIARD International Institute of Academic Research and Development

INTERNATIONAL JOURNAL OF ECONOMICS AND FINANCIAL MANAGEMENT (IJEFM )

E-ISSN 2545-5966
P-ISSN 2695-1932
VOL. 5 NO. 2 2020

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Macroeconomic Determinants of Deposit Money Banks’ Profitability in Nigeria: A Panel Data Analysis (2009-2018)

Edeh, Chukwudi Emmanuel Ph.D., Obijiofor, Njideka Regina & Edeh Charity Nonyelum, Obi, Cyril Ogugua Ph.D. AND Mbaeri, Clara Ndidiamaka

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Abstract

The objective of this study is to identify the macroeconomic determinants of profitability of deposit money banks in Nigeria. Five deposit money banks (UBA Plc, Access Bank Plc, Zenith Bank Plc, First Bank Plc, and Fidelity Bank Plc,) were randomly sampled out of the existing twenty-two (22) deposit money banks in Nigeria. Time series macroeconomic variables used for the study includes monetary policy rate, exchange rate, financial deepening, all share index, exchange rate, and rule of law index were obtained from the Central Bank of Nigeria Statistical Bulletin and the World Bank database for the period 2009 – 2018.. The panel data was analyzed using the Random effect and fixed effect model techniques. Findings reveal that exchange rate does not determine the profitability of deposit money banks [?(?) ??? ??? = 0.9472]; one unit increase in exchange rate leads to a 0.00237 decline in the profitability of deposit money banks in Nigeria. Financial sector development does not determine deposit money banks’ profitability[?(?) ??? ??? = 0.7878]; one unit increase in financial sector growth leads to a 0.05 unit increase in the profitability of deposit money banks in Nigeria. Stock market development does not determine deposit money banks’ profitability [(?(?) ??? ???? = 0.1509]; one unit increase in stock market development leads to a 0.96 unit increase in the profitability of deposit money banks in Nigeria. Monetary policy rate do not determine money deposit banks’ profitability [?(?) ??? ??? = 0.0826]; one per cent increase in monetary policy rate leads to a 0.11 per cent increase in the profitability of deposit money banks in Nigeria. Rule of Law does not determine money deposit banks’ profitability[?(?) ??? ????????? = 0.8642]; one-unit improvement in rule of law and good governance leads to a 0.30 increase in the profitability of deposit money banks in Nigeria. The study recommends for an upward review of the lending-deposit ratio of banks from 65% to 75% so as to e

keywords:

Bank’s profitability; determinants; panel data, deposit money bank

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