ANALYSIS OF BANKS FINANCIAL PERFORMANCE IN A LIBERALIZED BANKING ENVIRONMENT: A STUDY OF FIVE SELECTED BANKS IN NIGERIA.

Abstract

The very essence of this research was to assess the financial performances of banks in a liberalized banking environment using an ordinary Least Square (OLS) method of regression analysis to analyze five selected banks in Nigeria. The time series properties of the variables were investigated by conducting a unit root test to determine the stationarity status of the data using annual series data spanning from 2001 – 2010. The analysis was further extended to cointegration and error correction modeling (ECM) technique in order to test for the stationarity status of the data by conducting a unit root test using the Dickey–Fuller (DF) and Augmented Dickey–Fuller (ADF) test. The objective of this research among others is to find out the effect of the nominal lending rate, the exchange rate and the credit volume on banks financial performances in terms of their profitability. The data sources were mainly from a ten year financial summary of the banks selected and CBN Statistical Bulletin, various years. From the empirical evidence made from the study so far, it was discovered that the nominal lending rate and the total credit had a positive impact on the profit of the five selected banks under review. Only exchange rate has a negative significance which is contrary to the other variables studied. The overall submission was that the variables employed are statistically significant as over 98 percent of them were explained at the long run. The researcher, therefore, recommends that to improve banks financial performance, the banks need a good regulatory environment that will enable them to expand their scope of business but strictly within the financial service industry and also good corporate governance that will allow for transparency and minimize fraud in the bank.

Keywords: Exchange Rate, Financial Performance, Interest Rate, Liberalization, Total credit

Unique Article ID: IJBMR-185A

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