Financial Deepening and Bank Performance: A Case Study of Selected Commercial Banks in Nigeria

Abstract

This paper titled, “Financial Deepening and Performance of Selected Commercial Banks in Nigeria” examined the extent to which financial deepening has affected the performance of selected Nigerian commercial banks in terms of profitability. The study empirically investigated the relationship between financial deepening and bank performance using financial deepening (M 2 /GDP), ratio of credit to private sector—GDP, ratio of deposit liabilities—GDP as variables of financial deepening while performance measure of interest is profitability. The study adopted descriptive research design to explore the relevance of financial deepening on banks performance. The data for this study were sourced secondarily. Methods of descriptive and empirical analysis were used to analyze the data, while relevant statistics were used to evaluate the models for consistency or otherwise with expectations, statistical significance and explanatory power. Findings revealed that each component of financial deepening indicators has a strong relationship and are statistically significant; this provides empirical evidence that financial deepening made positive contributions to the level of profitability of the selected commercial banks in Nigeria. This paper concludes that contributions of each component of financial deepening to selected commercial banks performance is strong and are statistically significance. Thus, the paper has bridged the gap between economists’ belief and empirical work in the literature by establishing a strong and positive contribution of financial deepening to selected commercial banks profitability.