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Income Diversification and Performance of Deposit Money Banks in Nigeria

Ele, Linus Egwu, Okwajie, Fabian Ajijias

Abstract

This study focused on income diversification and performance of deposit money banks in Nigeria. The study adopted ex post facto research and employed the General Method of Moments (GMM) technique to analyze the panel data generated from the 21 banks used for the study. The preliminary econometrics test showed that all the variables were stationary at levels. The study revealed that loan interest income has significant and positive effect on the financial performance of the deposit money banks with coefficient and p-value of [0.094415, 0.0000]; foreign exchange transaction income has significant positive effect on the financial performance of the deposit money banks [coefficient is 0.101002, p-value 0.0073]; electronic banking transaction income has significant and positive effect on the financial performance of the deposit money banks. The coefficient of the variable is [1.092108 whereas its p-value is [0.0000] , the card maintenance fee income was found to have positive and significant effect on the financial performance of the deposit money banks and the coefficient of the parameter is [1,232108 while the p-value is [0.0000], and conversely, the investment advisory fee income was found to have negative and no significant effect on financial performance of the deposit money banks [coefficient = - 0.012503, p-value = 0.0000].Based on the findings, the study concluded that income diversification makes important contribution to the financial performance of deposit money banks in Nigeria, the loan interest income of the banks is associated with an upward growth in financial performance; summarily, income diversification enhances financial performance of deposit money banks. Based on the findings, it was recommended that deposit money banks should be more committed and proactive towards implementing interest generating loan/credit intermediary products by recognising and taking remedial steps in issues relating to loan interes

Keywords

Card maintenance fees incomeCommission IncomeElectronic banking

References

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A research project submitted in partial fulfil

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