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

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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)

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.

Suggested Citation

  • Oluwarotimi Ayokunnu Owolabi & Ibukun Omoshola Fayemi, 2017. "Effect of Interest Rate Determinants on the Aggregate Performance of Deposit Money Banks in Nigeria’s Banking Sector," International Journal of Finance & Banking Studies, Center for the Strategic Studies in Business and Finance, vol. 6(6), pages 29-41, October.
    • Handle: RePEc:rbs:ijfbss:v:6:y:2017:i:6:p:29-41
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    References listed on IDEAS

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    1. Cecilia Maigua & Gekara Mouni, 2016. "Influence of Interest Rates Determinants on the Performance of Commercial Banks in Kenya," International Journal of Academic Research in Accounting, Finance and Management Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Accounting, Finance and Management Sciences, vol. 6(2), pages 121-133, April.
    2. Ang, Andrew & Bekaert, Geert, 2002. "Regime Switches in Interest Rates," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(2), pages 163-182, April.
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