JOURNAL OF ACCOUNTING AND BUSINESS

INTEREST RATES AND NET INTEREST MARGIN OF NIGERIAN BANKS (1990 - 2024)

BONA EKUJEREONYE, Prof. MICHAEL O. NDUGBU, Prof. KINGSLEY C. OTIWU

April 18, 2026

Citation

JOURNAL OF ACCOUNTING AND BUSINESS , Vol. 13 (1) (2026) , pp. 58-76

Details

ISSN: 1596-9912
Published: April 18, 2026
Status: Published

Abstract

The study examined the effects of interest rates on the net interest margin of Deposit Money Banks in Nigeria for the period 1990 - 2024. Interest rate was considered in terms of bank deposit rate, bank lending rate, treasury bills rate and monetary policy rate. The study as such adopted a quasi-experimental research design whereby secondary data were relied upon. These data which were yearly time series data on the aforementioned variables were collected from the statistical bulletin of the CBN (Central Bank of Nigeria) and the World Bank. The data set obtained was subjected to descriptive analysis, ADF unit root test, and Autoregressive Distributed Lag (ARDL) short run analysis, bounds cointegration test and Error Correction Mechanism (ECM) estimation. Short run analysis revealed that lagged net interest margin (NIM), bank deposit and lending rates have negative effects on NIM while treasury bills and monetary policy rates have positive influences on NIM as only the effects of bank lending, deposit and monetary policy rates were significant. EMC estimation revealed that these interest rates have long run equilibrium relationships with the NIM of banks in Nigeria. The study therefore concluded that interest rates have significant effects on the net interest margin of Deposit Money Banks in Nigeria. Hence, the study suggested that Deposit Money Banks should be encouraged to offer better and competitive deposit rates that will help them attract more funds into the banking system; and these banks should at the same time strive to ensure that their lending rates are reasonable in order to boost their net interest margins. Thus, the gap between prime and maximum lending rates should be narrowed significantly.

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