Interest Rates and Commercial Banks Performance in Nigeria: A
Panel Data Study

Sampson Ikenna Ogoke; Amadi Jeff Chizuru

doi:10.56201/ijefm.v9.no5.2024.pg1.23

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Interest Rates and Commercial Banks Performance in Nigeria: A Panel Data Study

Sampson Ikenna Ogoke and Amadi Jeff Chizuru

Abstract

This study examined the effect of Nigerian interest rates on the profitability of quoted commercial banks using panel from 2014-2023. The general purpose is to investigate the effect of various components of interest rate on the profitability of commercial banks. Return on equity and earnings per share were modeled as the function of prime lending rate, maximum lending rate, 3months money market rate,6 months money market rate and 12months money market rate. Time series data were sourced from Central Bank of Nigeria Statistical Bulletin while panel data were sourced from Nigeria Exchange Group fact book and financial statement of the quoted commercial banks. Multiple regressions with econometrics view statistical package were used as data analysis techniques. From model 1, the study found that 48 percent of the variation in return on equity of the quoted commercial banks was explained by variation in the interest rate variables in the equation. that maximum lending rate have negative and no significant effect such that a unit increase led to 0.08 percent decrease in return on equity of the quoted commercial banks, prime lending rate and 6months money market rate have positive effect on return on equity of the quoted commercial banks such that a unit increase in the variables led to 0.27 and 3.3 percent increase in return on equity. 12months and 3 =months negatively affected return on equity of the quoted commercial banks that reduces return on equity by 1.2 and 2.7 percent. From model 2, the estimated model found that interest rates as formulated in the model explained 78.3 percent variation in earnings per share of the quoted commercial banks. The independent variables proved that maximum lending rate have negative and no significant effect such that a unit increase led to 0.23 percent decrease in earnings per share of the quoted commercial banks, prime lending rate and 6months money market rate have positive effect on earn

Keywords

Interest RatesCommercial Banks PerformancePanel Data Study

References

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Interest Rates and Commercial Banks Performance in Nigeria: A Panel Data Study

Abstract

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