MACROECONOMIC FLUCTUATIONS AND BANK PERFORMANCE: TESTING THE RESILIENCE OF NIGERIAN BANKING SYSTEM PROFITABILITY
Abstract
This study examines the effect of macroeconomic fluctuations on banks performance by testing the resilience of Nigerian banks profitability to shocks from the macroeconomic environment with quarterly data from 1986Q1 to 2018Q4 that coincide with the period of structural adjustment program in Nigeria to the current democratic dispensation using the impulse response functions and variance decompositions of Vector Autoregression method. The study reveals that Nigerian bank performance is not resilient to exchange rate, inflation, interest rate and net export shocks but resilient to unemployment and economic growth shocks using return on assets and return on equity as measure of bank performance. The non-resilience of bank performance to exchange rate, inflation, interest rate and net export shocks reflects a countercyclical relationship between bank performance and macroeconomic fluctuations while the resilience of bank performance to unemployment and economic growth shocks is indicative of a rocyclical relationship of bank performance to macroeconomic fluctuations. The study also reveals that about 20% of Bank profitability decline results from the macroeconomic fluctuations within 10quarters which represents about to 2% profitability decline per quarter from macroeconomic fluctuations with exchange rate and inflation showing greater declining effects on Nigerian bank profitability. Nigerian banks regulatory and supervisory authorities must therefore not ignore sound macroeconomic policies if bank failures are to be minimized, most especially the maintenance and sustenance favourable exchange rate regime.
This article is available as a PDF download
Published in UNIPORT JOURNAL OF BUSINESS, ACCOUNTING & FINANCE MANAGEMENT
ISSN: 1596-9911
This article appears in our peer-reviewed academic journal
View JournalRelated Articles
Explore similar research in our collection
THE IMPACT OF GLOBAL TRENDS IN DIGITAL PAYMENT SYSTEMS ON FINANCIAL PERFORMANCE AND OPERATIONAL EFFICIENCY OF LISTED DEPOSIT MONEY BANKS: EVIDENCE FROM MOBILE BANKING AND OTHER DIGITAL CHANNELS
EBE, EMMANUEL CHUKWUMA, NWANKWO, PETER EMEKA, OKEREKE, CHIMAOBI DARLINGTON
May 27, 2026
This study examines the effect of global trends in digital payment systems on the financial perfor...
View ArticleEFFECT OF DEBT CAPITAL ON PROFITABILITY OF LISTED FOOD AND BEVERAGE MANUFACTURING FIRMS IN NIGERIAN EXCHANGE GROUP FROM 2011-2022
DR. ELEKIMA, AMBIYE OKONTE, DR. WOMENAZU, HARRY, SUNDAY
May 20, 2026
The debt capital has been the major source of manufacturing companies’ fund for the purpose of p...
View ArticleTHE IMPACT OF PUBLIC SECTOR REFORMS ON FINANCIAL TRANSPARENCY AND CORRUPTION REDUCTION: EVIDENCE FROM NIGERIA
IDOWU, OLUBUKOLA MODUPE, OGUNTUASE, ALEXANDER TUNDE, UCHEHARA, CHRIS CHIGO, OYEDOKUN, GODWIN EMMANUEL
May 7, 2026
This study investigates the effects of key public sector reforms on transparency in financial report...
View Article