Modelling banks' interest margins in Nigeria

Artikel

This study applied panel analysis to determine the factors influencing interest margins in Nigeria using bank-specific, sector-specific and macroeconomic data ranging from 2010:Q1 to 2014:Q2. Based on the Hausman test, a fixed effect model in a generalized form (GLS) was estimated. The result shows that credit risk, growth in loans and advances, staff operating cost, GDP growth, inflation rate and money supply growth are significant determinants of interest margins in Nigeria. Consistent with previous studies, staff cost exerts highest impact on interest margins followed by fixed effects term. Further analysis of the banks' fixed effects reveals that seven banks control about 64%, which raises a policy concern for banks' supervisors. The result also reveals that banks usually transfer their staff operating costs to customers by either imposing exorbitant lending rates or low deposit rates or both. This study recommends the formulation of strategies for reducing growing banks staff cost in the area of levels of compensation, employee turnover, redundancy, automation processes and outsourcing of non-critical tasks should be given due attention to ensure efficiency and competitive margin that could spur growth in Nigeria.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Journal: CBN Journal of Applied Statistics ; ISSN: 2476-8472 ; Volume: 07 ; Year: 2016 ; Issue: 1 ; Pages: 23-48 ; Abuja: The Central Bank of Nigeria

Classification and Topics

• Classification: Wirtschaft ; Single Equation Models; Single Variables: Panel Data Models; Spatio-temporal Models ; Interest Rates: Determination, Term Structure, and Effects
• Subject: Interest Margin ; Panel Data Models ; Weighted Least Squares

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Udom, Ini S. ; Agboegbulem, Ngozi T. I. ; Atoi, Ngozi V. ; Adeleke, Abiola O. ; Abraham, Ochoche ; Onumonu, Ogochukwu G ; Abubakar, Murtala
• Event: Veröffentlichung
• (who): The Central Bank of Nigeria
• (where): Abuja
• (when): 2016

Further information

• Handle: http://hdl.handle.net/10419/144791
• Last update: 10.03.2025, 11:43 AM CET