INTEREST RATE SPREAD AND DEPOSIT MONEY BANKS’ PERFORMANCE IN NIGERIA: A COMPARATIVE ANALYSIS OF PERFORMANCE INDICATORS

ARIWA, Florence O.
Department of Banking and Finance,
Michael Okpara University of Agriculture, Umudike
florony4j@gmail.com
UREMADU, Sebastian Ofumbia
Department of Banking and Finance,
Michael Okpara University of Agriculture, Umudike
ABSTRACT
The study investigated interest rate spread (IRS) and performance of deposit money banks’ (DMBs) in
Nigeria for the period 2007 to 2020. Specifically, the effect of IRS on three performance indicators of DMBs
namely return on assets (ROA), return on equity (ROE) and profit after tax (PAT) were compared. Panel
data (fixed effect) regression technique was employed as the test statistic. Findings showed that IRS had
significant effect on ROE and PAT of the DMBs while it had no significant effect on ROA of DMBs in
Nigeria. The study recommended, among others, that Central Bank of Nigeria (CBN) should fashion out
ways of narrowing IRS in Nigeria, by either by decreasing lending rate or increasing deposit rate, thus,
increase performance of DMBs in Nigeria.
Keywords: Interest rate spread, return on assets, return on equity, profit after tax, performance