ABSTRACT

This study investigates the dynamic relationship between macroeconomic variables and deposit money bank performance in Nigeria, emphasizing the insights derived from the Error Correction Model (ECM) analysis. Through a rigorous examination of key economic indicators, including Gross Domestic Product (GDP), Inflation Rate (INFR), Interest Rate (INTR), Crude Oil Price (COP), and Exchange Rate (EXR), the study unveils compelling findings regarding short-run dynamics and equilibrium adjustments. The analysis uncovers significant relationships: Gross Domestic Product (GDP) positively influences bank profitability, while changes in interest rates (INTR) exhibit a negative impact. Moderate inflation (INFR) fosters enhanced bank earnings, and both rising crude oil prices (COP) and favorable exchange rate movements (EXR) contribute positively to bank profitability. Cointegration analysis supports the existence of long-term equilibrium relationships among variables, reinforcing the importance of sustainable economic interactions. These findings offer valuable insights for policymakers and banking practitioners, enabling them to make informed decisions that promote a resilient and thriving financial environment in Nigeria.