The impact of macro-economic variables on the profitability of selected listed commercial banks in Nigeria, 1990–2016

Abstract

The study investigated the relationships between macro-economic variables and the profitability of selected listed commercial banks in Nigeria from 1990–2016. Three different measures of profitability were used: Return on Assets (ROA), Return on Equity (ROE) and Equity Multiplier (EM), as defined in the body of the study. The applicable model is the GMM and the pooled regression model. What is of significance in the present study, is that for the Nigerian economy, the real GDP and lending rate have a positive relationship with the profitability of banks, whichever way it is being measured, using ROA, ROE or EM. Other important results are that with all these three measures of profitability, the real GDP’s correlation is insignificant, while that of the lending rate is very significant. Also, using the three measures of profitability above, the inflation rate is negative with low significance. The results indicate that the impact of macro-economic variables on the profitability of commercial banks depends on how the variables used are being measured.

To cite: Loto, M.A. (2018). The impact of macro-economic variables on the profitability of selected listed commercial banks in Nigeria, 1990–2016. Journal of Management & Administration (2018/1), 30–50. https://hdl.handle.net/10520/EJC-11077d300c