Effect of Interest Rate Determinants on the Aggregate Performance of Deposit Money Banks in Nigeria’s Banking Sector

Oluwarotimi Ayokunnu Owolabi and Ibukun Omoshola Fayemi
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Oluwarotimi Ayokunnu Owolabi: Department of Economics and Development Studies, Covenant University, Ota, Nigeria
Ibukun Omoshola Fayemi: Department of Economics, Accounting and Finance, Bells University of Technology, Ota, Nigeria

International Journal of Finance & Banking Studies, 2017, vol. 6, issue 6, 29-41

Abstract: In this paper, the effect of selected interest rate determinants on the performance of Deposit Money Banks in Nigeria are investigated. In this context, the interest rate determinants are analyzed for their significant effect on the performance of the banks as measured by the Asset size, and related to that the determinants are further analyzed for significant difference between periods of high bank performance and low bank performance over the period of 1998 to 2015.. Data were sourced from the Central Bank of Nigeria Statistical bulletin and World Development Indicators.The findings of Multivariate ordinary least squares regression revealed that exchange rate has a positive and statistically significant effect on Aggregate Deposit Money Bank performance, Monetary policy rate and Credit Risk have a negative and statistically significant effect on Deposit Money Bank performance, while Inflation rate and savings deposit rate have a statistically insignificant effect on Aggregate Deposit Money Bank performance. Results of independentsamples t-test revealed significant difference in means of interest rate determinants between high and low aggregate bank performance periods. The study recommends Naira devaluation and reduction of monetary policy rate amongst other recommendations to boost aggregate bank performance in Nigeria.

Keywords: Deposit Money Bank performance; Interest rate determinants; Total Assets; Exchange rate; monetary policy rate; credit risk; Savings Deposit Rate; Inflation Rate; Nigeria (search for similar items in EconPapers)
Date: 2017
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