Relationship between Macroeconomic Variables and Interest Rate: Evidence from Nigerian Deposit Money Bank


  • Aderemi Daniel Adekanmi Federal University Oye-Ekiti
  • Ebunoluwa Tokunbo Adeoye Adeleke University
  • Temitope Peter Isinkaye Obafemi Awolowo University
  • Paul Oladunmomi Omilegan Federal University Oye-Ekiti


This study was conducted to assess the effect of interest rate on financial performance of listed
Deposit Money Bank (DMBs) listed on the Nigeria Stock Exchange (NSE) between 2015-2020.The study
population comprised of (14) listed DMB listed on the NSE. The total population was studied hence, the sample
size was made up of (14) DMBs. Purposive sampling technique was employed in the determination of the
sample size. Panel data was used which consists of 84 observations analysed using multiple regression model.
Robust regression model was employed to test the effect of interest rate and financial performance of DMBs.
The outcome of this analysis showed that maximum lending rate has a coefficient of 0.319 which is significant
at 1% (p=0.005). Domestic Money supply is also found to be significant at 5% (p=0.045) with coefficient of -
0.102. These results show that maximum lending rate lead to increase in financial performance, domestic
money supply rate lead to increase in financial performance while monetary policy rate results in decrease
return on asset among DMBs in Nigeria. The study recommends that the Central Bank of Nigeria should
redefine the domestic money supply as a tool for monetary policy by establishing an equilibrium level. This
would allow more funds to be made available to deposit money banks so that they could improve their
performance and advance loan applications






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