Bank diversification strategies and financial performance in Nigerian economy

Abstract

This paper looked at bank diversification strategies (BDS) and financial performance in the Nigerian economy. The data was sourced from World Bank Report (2019), Nigeria Deposit Insurance Corporation report (2019), and Central bank of Nigeria Statistical Bulletin (2019). Unit root (UR) test and Vector autoregressive (VAR) model were used to find out the relationship between bank diversification strategies and the performance of the Nigerian economy. The study affirmed that Sectorial Loan Diversification (LnSDIV) positively and significantly affected the Gross Domestic Product Growth Rate (LnGDPR). Revenue Diversification (LnRDIV), LnDDIV, and Annual Inflation Rate (LnAIFR) affected negatively, Gross Domestic Product Growth Rate (LnGDPR). Sectorial Loan Diversification (LnSDIV) and LnRDIV significantly drive the Nigerian economy. The paper concluded that LnSDIV and LnAIFR had a short-term impact on the Nigerian economy. The paper recommends that policy on stable diversification of economy regime capable of attracting both local and foreign investments in Nigeria should be implemented.