EFFECT OF MACRO AND MICRO ECONOMIC FACTORS ON PROFITABILITY OF DEPOSIT MONEY BANKS IN NIGERIA
Abstract
ABSTRACT
The objective of this study was to examine the important characteristics influencing profitability of
Deposit Money Bank Groups (DMBGs) in Nigeria. The study specifically examined the effect of bank size,
leverage, liquidity, exchange rate, inflation and money market interest rate on the profitability of DMBGs
in Nigeria. The study adopted the ex-post facto research design because the event under investigation
had already taken place. The population of the study was made up of 13 DMBGs listed on the Nigeria
Exchange Group. The sample size for the research were 6 DMBGs that has their annual reports online for
the period of 2014 to 2021. Descriptive statistics such as mean and standard deviation were used in
describing the nature of the data while multiple regression was used to validate hypotheses. The results
showed that: bank size has an insignificant negative effect on profitability; leverage has an insignificant
positive effect on profitability; liquidity has an insignificant positive effect on profitability provision;
exchange rate has a significant positive effect on profitability; inflation has an insignificant negative
effect on profitability and money market interest rate has an insignificant negative effect on profitability.
Based on these findings, the study recommended that bank managers should regularly analyze how
exchange rate affects their revenue from different stream, and avail appropriate strategy to reduce the
magnitude of the adverse effect of exchange rate variations on their bank’s profitability.
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