ABSTRACT

The study investigated the effect of deregulation of financial system on the performance of ■ commercial banks in Nigeria between 1980 and 2014, The performance of commercial banks in Nigeria was measured in this study using both banks total assets and banks’ profit before tax parameters. Time series data obtained from CBN Statistical Bulletin (various issues) and annual financial reports of various banks in Nigeria (various issues) covering the period 1980-2014 was used in the study. Data were analyzed using descriptive statistics and the Ordinary Least Squares (OLS) regression technique. The data was first examined for unit roots using the Augmented Dickey Fuller (ADF) with a view to ascertaining their stationarity. Result revealed that all the unlogged variables used for the study were integrated of order one, 1(1) except for liquidity ratio(LR) and money supply growth rate (MSGR) which were used at level, 1(0). Similarly, all the logged variables used for the study were integrated of order one, 1(1) except for inflation rate, liquidity ratio (LR), money supply growth rate (MSGR) and Bank’s profit before tax (PBT) which were used at level, 1(0). Empirical findings further revealed that bank’s deposit rate (BDR), financial deepening (FND), maximum lending rate (MLR), real exchange rate (RER), and the dummy variable deregulation significantly influenced commercial bank’s total assets within the reference period. Also, inflation rate, liquidity ratio, money supply growth rate, real exchange rate and the dummy variable deregulation significantly influenced bank’s profit before tax in Nigeria within the study period. The result ofthe study revealed that the adoption of financial system deregulation policy in Nigeria has led to increase in the performance of commercial banks in Nigeria through increase in banks total assets and profit before tax. Empirical findings further revealed that, while exchange rate had a significant negative effect on banks total assets and banks profit before tax, inflation rate, liquidity rate, monetary policy rate, and money supply growth rate failed to make any contribution to the performance of commercial banks in Nigeria in terms ofits total assets. The same was observed using banks profit before ■ tax model where banks deposit rate, financial deepening, maximum lending rate, and monetary policy rate failed to make a significant contribution to the profit before tax of • ' commercial banks in Nigeria within the period under study. The study recommends that there is need to pursue policies that would ensure that Bank’s deposit rate (BDR), financial deepening (FND) and maximum lending rate (MLR) are used in such manner that they would continue to positively influence commercial banks total assets. There is need to pursue policies that- would ensure that inflation rate, liquidity ratio, money supply growth rate are ■ monitored to ensure that they continue to favour bank’s profit before tax.