Banking Sector Regulations and Commercial Banks Performance in Nigeria

Abstract

This study investigated the effect of banking sector regulation on commercial banks performance of in Nigeria. The time series data spanning from 1998 to 2025 was generated from the CBN statistical bulletin, with special interest on variables of monetary policy rate, liquidity ratio, and loan-to-deposit ratio, as measures of banking regulation, and return on assets as the proxy of commercial banks performance. The ex-post facto research design was adopted and the data were analyzed with the application of Augmented Dickey Fuller unit root test, ARDL bound test and the ARDL short-run Error correction Model with the aid of E-view statistical package. The study found that long-run relationship exists between the variables. Furthermore, the study holds that Monetary Policy Rate has a positive and significant impact on commercial banks performance (ROA) in Nigeria. Liquidity Ratio has a negative and insignificant impact on commercial banks performance (ROA) in Nigeria. Loan to-deposit ratio (LTDR) has a negative and insignificant impact on commercial banks performance (ROA) in Nigeria. The study concluded that banking regulation has a significant effect on commercial banks performance in Nigeria. The study recommends that banks should maintain prudent lending practices. Banks should carefully assess borrowers' creditworthiness and ensure that loan portfolios are well-diversified to mitigate risks. Effective liquidity management practices should be implemented to ensure stability and facilitate smooth operations. Policymakers should continue to carefully manage the Monetary Policy Rate