Given the recent developments in the Nigerian banking industry, only a profitable banking sector is better able to withstand negative shocks and contribute to the stability of the financial system. This assertion compels an in depth investigation of the determinants of the profitability of deposit money banks in Nigeria. Our data set is made up of 147 bank level observations over a 10-year period from 2001 to 2010 in respect of 15 banks that satisfied the study requirements. Data were obtained from the annual reports and accounts of the sampled banks. Pooled OLS (Pooled ordinary least square) stated in a multiple regression form was used to estimate the coefficients. Major outcomes of the analysis include that increase in size (higher total assets) may not necessarily lead to higher profits due to diseconomies of scale; higher capital-assets ratio and loans and advances contribute strongly to bank profitability. Overall, the paper suggests bank size, capital and asset composition as the major endogenous determinants of bank profitability in Nigeria.
This paper examines the impact of information technology on bank profitability. Using a sample comprising one-quarter of the banks in Nigeria currently quoted on the Nigerian Stock Exchange, regression results were in conflict with a priori expectations, which indicated that information technology spending in the study period had no significant impact on future operating performance. The results remained robust irrespective of alternative measures of profitability. This surprising outcome, among other things, is likely connected with the fact that investment in information technology is now a common denominator for all banks and that the data set is from a sub-Saharan African country where investment in information technology by banks is not yet at its prime level. However, what the results show is that information technology investment is inevitable for banking institutions to enable them to continue to operate efficiently in the current competitive banking industry.
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