DETERMINANTS OF DEPOSIT MONEY BANKS’ PROFITABILITY IN NIGERIA

Abstract

The Nigerian banking system exhibits fluctuating profitability compared to other countries in the world. This study examines the determinants of bank profitability in Nigeria. It relates internal bank specific and macroeconomic indicators to the overall profitability of Nigerian banks based on Return on Asset as the measure of profitability. The study uses a panel of individual banks’ financial statements from 2004 to 20012. According to the empirical results, Nigerian banks suffer from low quality of loans and do not monitor the repayment of the loans disbursed and more so, their assets cannot cover the amount of loan disbursed. This study also finds that macro economic variables do not have a major effect on bank profitability and inflation posed adverse effect on profitability. Most importantly, Sterling bank should react quickly to all the variables considered in this study, al nearly posed a negative influence on their profitability in that if these entire factors are properly monitored, they are likely to be better off in their performance.