Changes in Macroeconomic Variables and Financial Performance of Nigerian Deposit Money Banks

Olufemi Ademola, Peter Ogbebor, Olurotimi Ogunwale and Kehinde Ayanbadejo
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Olufemi Ademola: Department of Finance, Babcock University, Nigeria
Peter Ogbebor: Department of Finance, Babcock University, Nigeria
Olurotimi Ogunwale: Department of Finance, Babcock University, Nigeria
Kehinde Ayanbadejo: Lagos Chamber of Commerce and Industries (LCCI), Nigeria

International Journal of Research and Innovation in Social Science, 2024, vol. 8, issue 9, 3242-3249

Abstract: This study examined how changes in macroeconomic variables impact financial performance of Nigerian banks from 2010 till 2021 using panel data and estimated utilising panel regression analysis and descriptive analysis. The multiple regression model used Real GDP Growth (RGDPG), lagged Real GDP Growth (RGDPG (-1), Inflation (INF), Exchange Rate (EXR), Interest Rate (PLR), Money Supply Growth (GMS), and Liquidity Ratio (LIQ) as proxies of macroeconomic variables and as independent variables while financial performance, captured by both asset and equity returns (ROA) and (ROE) were dependent variables. With the exception of INF plus RGDPG, the panel regression analysis results showed that changes in most of the macroeconomic variables have negative and significant impacts on the financial performance of Nigerian banks. RoA and RoE are negatively and negligibly impacted by real GDP, whereas both RoA and RoE are positively and negligibly impacted by inflation. The research recommended that when creating and putting into practice strategic plans, Nigerian banks should consider how macroeconomic conditions may affect their operations and financial performance. Furthermore, banks are encouraged to be involved in the development of any policies that may affect their operations.

Date: 2024
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