IIARD International Institute of Academic Research and Development

IIARD INTERNATIONAL JOURNAL OF BANKING AND FINANCE RESEARCH (IJBFR )

E-ISSN 2695-1886
P-ISSN 2672-4979
VOL. 2 NO. 3 2016

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Effects of Selected Macroeconomic Variables on Commercial Banks Performance in Nigeria

Henry Waleru Akani, Dr. Ifeanyi Nwanna and Prof. Alex Mbachu

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Abstract

This study examined the effects of selected macroeconomic variables on Commercial Banks performance in Nigeria. The objective was to investigate the effects of selected macroeconomic shocks on the performance of Nigerian banks. Annual time series data were sourced from Central Bank of Nigeria (CBN) statistical bulletin and stock Exchange Factbook from 1980- 2014. Three multiple regressions models were formulated with Return on Investment (ROI), Return on Assets (ROA) and Return on Equity (ROE) as our dependent variables while the independent variables are Inflation rate (INFR), Real gross domestic product (RGDP), Real interest rate (INTR), Exchange rate (EXR), Broad Money Supply (M2)and unemployment Rate (UNE-R). The Johansen co-integration test, Unit Root test, Vector Error (VECM) and Granger Causality tests with the use of econometric E-view were employed for the analyses. R2, F- statistics, Durbin Watson and Regression coefficient were used to determine the extent to which the independent variables were used to affect the dependent variables. Model I, revealed that inflation rate (INFR), Real Gross Domestic Product RGDP), Exchange Rate (EXR), and Broad money supply (M2) have positive but insignificant effects on Return on Investment while interest rate and unemployment rate have negative and insignificant effects on Return on Investment. Model II, the results shows that inflation rate (INFR), interest rate (INTR), exchange rate (EXR) have positive and significant effects while Real Gross Domestic Product (RGDP), Broad money supply (M2) and unemployment rate UNE-R) have negative and insignificant effect on Return on Assets. Model III results revealed that inflation rate (INFR), interest rate (INTR), exchange rate (EXR) have positive and insignificant effect while Real Gross Domestic Product (RGDP), Broad money supply (M2) and unemployment rate (UNE-R) have negative and insignificant effect on Return on Equity. The models summary reveals an R2

keywords:

Macroeconomic Variables, Banks Performance, Co-Integration and Causality Tests

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