Does Business Environment Impede Performance of Nigerian Commercial Banks?

AFRAG048

Does Business Environment Impede Performance of Nigerian Commercial Banks?

1 Sunday Daniel Uche 2 Idika, Joel Ekeleme, 3 Onyike, Sixtus Chimezie & 4 Nwadike, Emmanuel Chijioke

1, 2, 3 & 4 Department of Banking and Finance, Michael Okpara University, Umudike Umuahia, Abia State,

4 Federal University of Science and Technology, Owerri, Imo State.

Email: onyikechimezie@gmail.com

Abstract

Business environment could make or mar business potentials and opportunities. When favourable, it is expected to foster productive private investment in all sectors of the economy. This study sought to get answers on how business environment otherwise called investment climate could impede the performance of the Nigerian banking industry within the period under study. Time series data were sourced from the CBN Statistical Bulletin and analyzed using multiple regression analysis, other diagnostic tests were also carried out. Findings from the study revealed that, business environment had affected the commercial banks performance within the study period. In particular, electricity consumption negatively and significantly impacted bank returns on equity, while domestic inflation rate and insecurity in the Nigerian business climate ranked third in their descending order of magnitude. All these three indicators were negative and significant in influencing bank performance in Nigeria. We therefore recommend for urgent policy action in order to positively transform Nigeria business environment and make it conducive for investors to operate unhindered. The government should create the right atmosphere for businesses including banks to thrive in the Nigerian economy by seriously tacking insecurity, moderate domestic inflation and adequately provide electricity to increase its consumption by banks and other businesses operating in Nigeria. This positive posture will no doubt trigger various investment studies in the years ahead.

Keywords: Return on equity, Bank performance, Business environment, Commercial banks, Central Bank of Nigeria, performance.

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