This study examined how interest rates affect the profitability of deposit money banks in Nigeria. The study was based on country aggregate level annual data that covered a period of thirteen years 1999 to 2012 and made use of multivariate regression analysis under an econometric framework. The Augmented Dickey and Fuller unit root test results indicate that the series are either I(0), I(1) or I(2) stationary. The estimated results show that Maximum lending rate, Real Interest rate and Savings deposit rate have negative and significant effects on the profitability of Nigerian deposit money banks as measured by return on assets at the 5% level of significance. Also, the study found that Real interest rate at the 8% level of significance has negative and significant relationship with Return on Equity of money deposit banks in Nigeria. On the other hand, the study found no significant relationship between interest rate variables and Net Interest Margin of Deposit Money Banks in Nigeria. The implication of the findings of this study suggests that the profitability of the banking sector is a function of changing interest rates. The study therefore recommends that government should adopt monetary policies that will help Nigerian deposit money banks to improve on their profitability and there is need to review and strengthen bank lending rate policies through effective and efficient regulation and supervisory framework. Banks can improve their profitability through charging moderate lending rates as against maximum rates as their circumstances may allow. Furthermore, the managers of money deposit banks are expected to create the conditions for an efficient banking system devoid of information asymmetry to adapt to changing macroeconomic variables of interest rates and inflation. Banks' management must efficiently manage their portfolios in order to protect the long run interest of profit-making.
This study examined the factors that affect the dividend payout policy of firms within the Life cycle theory framework. It sought to discover the propensity to pay or not to pay dividends by firms in Nigeria. The study was based on a sample of 62 firms with a total of 558 observations over a nine-year period covering 2000-2008. Maximum Likelihood (ML) Binary Logit (Quadratic hill climbing) models were used to undertake the analysis. The estimated results revealed that the tendency of a firm to pay or not to pay dividends is most affected by Return on Equity (ROE), Life cycle stage (LCS) and Size. The Test of Model Accuracy show that overall, the estimated model correctly predicts 74.55% (49.12% of the Dep=0 and 91.87% of the Dep=1) observations. The results of the Logit model Goodness-of-Fit test χ² to test The Validity of the Model report Hosmer-Lemeshow statistic of 13.12 (p-value = 0.175), and Andrews Statistic 11.72(p-value = 0.375) respectively. These statistics indicate that the Logit model provides a good fit to the data and that the estimates of the variables' parameters in the model are meaningful The above findings show that ROE and Size has positive relationships with the propensity to pay dividends while the relationship between life cycle stage and the propensity to pay dividends is negative. This is against the positive relationship expected by the study. Finally, one practical utility of the study is the fact that it can guide investors in Nigeria and elsewhere decide between capital gain and cash dividend firms in building their portfolios of investments.
This paper examined the Empirical Regularities of Nigeria's Foreign Private Portfolio Investment Return and Volatility. The study covered the periods between 1981 and 2014. An EGARCH model was specified. The analysis involves carrying out the tests for Financial Assets and Risk assumptions. The study revealed that Foreign Private Portfolio Investment Returns show Volatility clustering. Secondly, Foreign Private Portfolio Investment Return and Risk were found to have Thick tail. Variance Ratio Test [VRT] was used to test the weak form efficiency of the efficient market hypothesis and hence the non-predictability of financial markets. The Results showed that changes in one direction are more often followed by similar changes in either direction (volatility clustering). Given that Nigeria's Foreign Private portfolio investment empirical imperatives is regular like that of the rest of the world, the paper thus recommends that investment decision models used by advanced analyst in developed countries can be applied to developing countries like Nigeria with little modification with respect to Foreign Private Portfolio Investment as their assets and risks display similar characteristics with assets and risks in developed countries.
This study has applied two distinct methods of analysis to evaluate and compare the predictive ability of certain EWIs of financial crisis when gaps are generated using two filter methods – the Hodrick – Prescott and Kalman Filters. First, the receiver operating characteristics curve where the area under the receiver operating characteristic (AU-ROC) curve and distance to corner were the basis of evaluation and 2, the logistic regression encompassing the estimates for individual indicator parameters, the model Expectation-Prediction Evaluation and the Hosmer-Lemeshow (HL) and Andrews Tests for goodness-of-fit. On the basis of the AU-ROC and Distance to Corner, the study concludes that the credit-to-GDP gap is a predictor of financial crisis in Nigeria. On the other hand, the Logit regression leads to the conclusion that none of the EWIs tested (Credit-to-GDP gap, Nonperforming loans, Loan-to-Deposit ratio and asset prices) could predict financial crisis at the 5% level of significance although credit-to-GDP gap could at 10%. Nevertheless, both the AU-ROC and Logit regression, suggest that credit-to-GDP gap outperforms Non-performing loans, Loan to deposit ratio and asset prices as EWIs of financial crisis in Nigeria. Going by the results of the AU-ROC curve and the Logistic regression, we do not find any significant difference whether gaps are from HP filter or Kalman filter. It is hoped that regulatory authorities apply the EWIs of financial crisis with caution, explore the different methodologies available and identify which EWI, filter method as well as the analytical model suitable for their jurisdiction.
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