THE DETERMINANTS OF INTEREST RATE SPREAD IN SELECTEDDEPOSIT MONEY BANKS IN NIGERIA

Authors

  • Sanni, M Accounting & Finance Department, Kwara State University, Malete, Kwara State, Nigeria Author
  • Kasali, R. K Accounting & Finance Department, Kwara State University, Malete, Kwara State, Nigeria Author
  • Fakunmoju, S. K. Accounting & Finance Department, Fountain University, Osogbo, Osun State, Nigeria Author

Keywords:

Bank-specific factor, Governance risk factor, Industry-specific factor,, Interest rate spread and Macro-economic factor

Abstract

In Sub-Saharan Africa (SSA), financial intercessor is low and unmatched with other developed and emerging
economies with high level of financial intermediaries. It is shown that there is high interest spread in Nigeria in
spite of financial liberalization. The study investigated the determinants of interest rate spread. A panel regression
analysis was employed to determine the effects of bank-specific, industry-specific, macro-economic and governance
risk factors on interest rate spread involving 13 selected deposit money banks in Nigeria from 2009 to 2018. The
Generalized Method of Moment (GMM) approach was employed. The study established that interest rate spread is
determined by bank specific and macroeconomic factors mainly for risk aversion, interest risk and operating cost,
monetary policy rate and inflation. The study recommends adoption of internal resolution discipline approach by
the CBN and Federal Government in curtailing excessive risk taking of systematically important banks (highly
capitalized banks) that translate into high interest spread

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Published

2025-05-23

Issue

Vol. 1 No. 1 (2020): AJEC

Section

Articles