THE CRITICAL ANALYSIS OF BANKS PERFORMANCE IN NIGERIA

THE CRITICAL ANALYSIS OF BANKS PERFORMANCE IN NIGERIA

ABSTRACT

The sound financial health of financial institutions especially banks is often seen as a guarantee not only to its depositors but also it enhances shareholders wealth, ensures employees’ commitment  as well assist in growing the economy. As a sequel to this maxim, efforts have been made over time by regulatory authorities at ensuring a stable financial position of bank. It was against this background that this study evaluates the performance of banks in Nigeria for the period of 2001 to 2010. The study adopted the ex-post research design and data were collated from annual statement and accounts of the banks under review. While, Return on Asset (ROA), Return on Equity (ROE) and Net Interest Margin (NIM) were used as the dependent variables Shareholders fund was used as the independent variable for the three hypotheses stated and the Ordinary Least Square (OLS) regression model was used to test the hypotheses stated. The result showed indicates that Shareholders’ Fund (SHF) have positive but insignificant impact on Return on Assets (ROA), Return On Equity (ROA) and Net Interest Margin (NIM) of these banks. It was therefore concluded from the results that financial structure of banks in Nigeria does not have significant impact on profitability of banks in Nigeria. We thus recommend that management of banks in Nigeria should ensure the utilization of optimal financial structure of their banks as regards the use of external financing that will enhance profitability of their banks thereby enhancing shareholders’ wealth maximization.