RE-EXAMANING THE DETERMINANTS OF BANK PROFITABILITY IN NIGERIA

Purpose To re-examine the determinants of bank profitability in Nigeria. Specifically, the study investigates the effect of managerial cost efficiency on bank profitability. Similarly, since there exists mixed results and controversies in the literature both in developed and developing countries regarding the effect of efficiency on bank profitability, this study employs the standard measure of efficiency. In addition, the work incorporates the roles of persistence which is often neglected in the literature in developing countries. Design/methodology/approach This study employs system generalized method of moments (SGMM). Findings The findings shows that cost efficiency is a strong determinants of bank efficiency in developing countries using the case of Nigeria. in addition, the profitability of banks in Nigeria persists over time, hence, the industry is fairly competitive. Research limitations/implications The recent policies of banking industry recapitalization meant to increase profitability and stability in the Nigeria and other African countries' banking industry will not be effective if the issue of managerial efficiency is not properly addressed. Practical implications Improve the banking managerial efficiency and this will positively reduce bad loans; the consequence is the stability in the banking system. Originality/value We introduce efficiency using standard measure of stochastic frontier analysis (SFA) for its measurement. Similarly, it introduce persistence into the literature in developing countries.