FINANCIAL DEEPENING AND COMMERCIAL BANKS PERFORMNCE: EVIDENCE FROM NIGERIA
Abstract
The work was aimed at determining the financial deepening impact on commercial bank performance in Nigeria. Financial deepening was decomposed into credit allocation to private sector as a ratio of GDP, money supply as a ratio of gross domestic product and total loan to deposit ratio while net interest margin was used as proxy for commercial bank performance. Data was sourced from the CBN statistical bulletin and the world bank data base from 2000 to 2022. The Augmented Dickey Fuller unit root test was used in determining stationarity of the data which were not stationary after first differencing hence giving room for the application of the ARDL bond test to determine the short and long run relationship between the implicated variables while the Granger causality test was used to determine the causality between financial deepening and commercial bank performance. The results revealed nonexistence of short run relation but existence of long run relationship was observed while a unidirectional relation between credit allocated to private sector ratio to GDP and net interest margin why no causality was recorded between other variables studied. The work recommends need for commercial banks to improve on their financial deepening activities so as to broaden their financial services operations and more so, policy makers should step in and ensure commercial banking broaden their financial deepening to accommodate individuals and the business world entirely.
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