FUNDING STRUCTURE AND PROFITABILITY IN NIGERIAN BANKING SECTOR: EVIDENCE FROM BANK DEPOSIT, MONEY MARKET FUNDING, AND CAPITAL STRUCTURE
Keywords:
ARDL, Bank profitability, Funding Structure, Interest Rate SpeedAbstract
This research examined the impact of funding structure on bank profitability in Nigeria, utilizing time series data from 1990 to 2023. The study utilized the Ho and Saunders Dealership Model as its theoretical framework and implemented the Autoregressive Distributed Lag (ARDL) methodology to analyses both short-term and long-term dynamics. The variables analyzed in the funding structure encompassed deposit funds, money market funds, and capital structure, whereas the profitability metric utilized was return on assets (ROA). The results showed that money market funds and capital structure had a significant negative effect on banking sector profits. Deposit funds, on the other hand, were not significant but still hurt profits. The study showed that relying on money market funding and having weak deposits and capital structure can hurt profits. These results helped policymakers and bank managers think about new ways to fund banks and new rules to make banks in Nigeria more stable and better at what they do.
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