INTEREST RATES AND NET INTEREST MARGIN OF NIGERIAN BANKS (1990 - 2024)
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.
This article is available as a PDF download
Published in JOURNAL OF ACCOUNTING AND BUSINESS
ISSN: 1596-9912
This article appears in our peer-reviewed academic journal
View JournalRelated Articles
Explore similar research in our collection
EFFECT OF EXTERNAL AUDIT OPINION ON RETURN ON ASSET OF SELECTED FOOD AND BEVERAGE MANUFACTURING FIRMS IN NIGERIA
OLADEJO MORUFU. O, OJO OLAJIDE. C, BADMUS IDAYAT.O
Jul 15, 2026
External audit has become a fundamental area of audit research in recent times especially after the ...
View ArticleFINANCIAL ASSETS PERFORMANCE AND HERDING BEHAVIOUR IN NIGERIAN FINANCIAL MARKETS. A CROSS-SECTIONAL ABSOLUTE DEVIATION (CSAD) APPROACH
IFEANYI S. MGBATAOGU (PhD), TAMNYEGEYA S. IKUE-JOHN (DBA), EMEKA J. OKEREKE (PhD), PRINCE C. NWAKANMA (PhD)
Jun 27, 2026
This study evaluates the effect of returns, volatility on herding behaviour in Nigerian financial ma...
View ArticleCYBER-SECURITY AND DIGITAL ACCOUNTING IN NIGERIA
EHIGIE ISOKEN PRAISE, EHIGIE A. HUMPHREY, PhD, FCA, IKPONMWONBA FAVOUR
Jun 24, 2026
This study explores the impact of cybersecurity practices on digital accounting in Nigeria, focusing...
View Article