Determinants of Bank Profitability: Panel Evidence on Bank-Specific Variables in Nigeria

This study investigated the impact of bank-specific variables on bank profitability in the Nigerian banking industry. In investigating the impact, a regression is used. Using an unbalanced panel data set comprising 65 observations of 15 banks over the 2006-2010 period, the regression results confirm and differ from some previous findings. The results reveal that bank capital adequacy, bank credit portfolio size, and bank credit risk are significant determinants of bank profitability in Nigeria. It also reveals that bank size, customers’ deposit, and management efficiency (measured by operating expenses/total asset ratio) are insignificant determinants of bank profitability in Nigeria. These results imply that Nigerian banks should focus more on increasing their equity-total asset ratio and credit risk management due to its impact on profitability. Therefore, the research provided evidence that supports the Central Bank of Nigeria’s policy of bank recapitalisation and credit management aimed at ensuring profitability and liquidity in the Nigerian banking secto