THE IMPACT OF ASSET LIABILITY MANAGEMENT (ALM) ON NON-INTEREST INCOME STRUCTURE OF DEPOSIT MONEY BANKS (DMBs) IN NIGERIA

THE IMPACT OF ASSET LIABILITY MANAGEMENT (ALM) ON NON-INTEREST INCOME STRUCTURE OF DEPOSIT MONEY BANKS (DMBs) IN NIGERIA

ABSTRACT

The study aims at examining the impact of Asset Liability Management on non-interest income structure of Deposit Money banks in Nigeria for the period of Year 2011 to Year 2015. The study reviews the role of non-interest income in the present day Nigeria banking system.

The study adopts a trend analysis of non-interest income, non-interest income as a proportion of banks’ net interest income and the extent to which banks’ asset liability management have any significant impact on the extent to which non-interest income is a significant component of banks’ aggregate performance.  To achieve these, variables for asset liability management and non-interest income were obtained from Obrimah (2015) and DeYoung (2013) respectively.  The study makes use of ordinary least square (OLS) technique for analyzing the regression model.

Empirical findings show banks’ asset liability management have impact on the extent to which non-interest income is a significant component of banks’ aggregate performance.  Evaluations of non-interest income show that foreign exchange fees form the highest source of non-interest income followed by fees relating to lending.  Also, reduction in Commission on Turnover by Central Bank of Nigeria from 5 per mille to 1 per mille (now replaced with account maintenance) presently did not reduce non-interest income.

Conclusively, bank’s size do not have positive relationship with non-interest income. Non-interest income as a proportion of banks’ net interest income reveals that banks categorized as small such as Fidelity bank, Stanbic IBTC, Sterling and Diamond had higher value of proportion of Non-interest Income to Net Income than First bank, Zenith bank, GTbank and Access bank.  An important implication of our findings is that large Deposit Money banks large banks may be overlooking opportunity to generate non-interest income.  Hence, large DMBs should not under-utilize their assets so as to generate more non-interest income.

Keywords:     Deposit Money banks, Non-interest Income, Asset Liability Management (ALM), Commission on Turnover