Price Levels, Exchange Rates, Interest Rates and Return on Equity of Commercial Banks in Nigeria
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Date
2020
Authors
Malgit, Amos Akims
Omagwa, Job
Mungai, John
Journal Title
Journal ISSN
Volume Title
Publisher
International Knowledge Sharing Platform
Abstract
The fluctuation return on equity of commercial banks in Nigeria over the years has been a source of concern. This
is largely due to the vital roles of commercial banks in the economic growth and development of the country. The
study sought to assess the effect of price levels, exchange rates and interest rates on return on equity of commercial
banks in Nigeria. The study applied annual panel data for the period 2010 to 2017. Correlation analysis indicates
that price levels, exchange rates and interest rates had significant correlation with return on equity of commercial
banks in Nigeria. Based on the panel regression analysis, the study found that price levels had insignificant effect
on return on equity (β=0.0027, p=0.0660). The study findings indicate that exchange rates had insignificant effect
on return on equity (β=-0.0002, p=0.0560). Interest rates had a significant effect on return on equity (β=0.0139,
p=0.0110) of commercial banks in Nigeria. The study therefore recommends that price discrimination can be
employed by banks so as to apply different interest rates on loans to different customers which can be guided by
their credit history. Additionally, the Central Bank should put in place effective monitoring mechanism in line
with floors and ceiling for lending rates so as to protect customers from exploitation by commercial banks. Further
studies can be done on the effect of price levels and exchange rates on return on equity of commercial banks in
Nigeria due to the unique results obtained in this study.
Description
A research article published in European Journal of Business and Management
Keywords
Price levels, Exchange Rates, Interest Rates, Return on Assets and Commercial Banks
Citation
Akims, M. A., Omagwa, J., & Mungai, J. (2020). Effect of Price Levels, Exchange Rates and Interest Rates on Return on Assets of Commercial Banks in Nigeria.