Financial Intermediation on the Soundness of Quoted Commercial Banks in Nigeria Okpu, Precious Miracle
Abstract
This study investigates the effect of financial intermediation on the soundness of quoted commercial banks in Nigeria. The study was undertaken to establish whether key financial intermediation activities contribute to the financial strength and stability of quoted commercial banks. An ex-post facto research design was employed, using secondary panel data obtained from the annual financial statements of fourteen quoted commercial banks in Nigeria for the period 2016–2025. Panel Ordinary Least Squares regression was used to estimate the specified models. Capital adequacy and asset quality were examined as indicators of bank soundness, while credit to the private sector as a percentage of gross domestic product, loan-to-deposit ratio and deposits to gross domestic product served as the financial intermediation variables. The first model shows that the explanatory variables account for 42.1 percent of the variation in capital adequacy. CPS/GDP has a positive and statistically significant relationship with capital adequacy, whereas LDR has a negative but statistically insignificant relationship. DM/GDP also has a negative and statistically insignificant relationship with capital adequacy. The second model indicates that the financial intermediation variables explain 41.7 percent of the variation in asset quality. CPS/GDP has a positive and statistically significant relationship with asset quality, while LDR and DM/GDP have positive but statistically insignificant relationships. The study concludes that financial intermediation is an important determinant of the soundness of quoted commercial banks in Nigeria. It therefore recommends that bank management strengthen credit appraisal and risk management, maintain adequate capital and liquidity buffers, improve deposit mobilization, and continuously monitor asset portfolios. The Central Bank of Nigeria should also strengthen regulatory supervision and promote strict adherence to prudential requirements to support a stable and sound banking sector.
Keywords
Financial IntermediationSoundnessQuoted Commercial BanksCapital AdequacyAssets Quality
References
Abdul, K. M., & Mahbubul, H. (2016). Financial soundness measurement and analysis of commercial banks in Bangladesh: an observation of selected banks. European Journal of Business and Social Sciences, 4(10), 117-129. Al Zaidanin, J. S., & Al Zaidanin, O. J. (2021). The impact of credit risk management on the financial performance of United Arab Emirates commercial banks. International Journal of Research in Business and Social Science,2147-4478, 10(3), 303-319. Aliyu, A. M., Onumoh, Y. A., Monira, N. A., Onmonya, L., & Dangs, A. Z. (2025). Effect of financial risk on profitability of deposit money banks in nigeria. International Journal of Accounting & Finance Review, 16(1), 1-6. Adumene, N., & Akani, H. W. (2020) Public financial management and performance of Federal MDAs in Rivers State. Journal of Accounting Research, 6(1), 1-8. Agwor, T. C. & Akani, H. W. (2020). Board composition and profitability of deposit money banks in Nigeria: A multi-variate panel data analysis. Journal of Accounting Information and Innovation, 6(9),11-26. Akani, H. W. (2025). Financial technology and sustainability of commercial banks in Nigeria, Contemporary Journal of Finance and Risk Management, 5(12), 1-26 Akani, H. W. (2026), Digital financial Inclusion and commercial banks soundness in Nigeria, GSAR Journal of Economics and Finance, 2(1), 1-21 Akani, H. W. (2024). Debt financing and return on assets of quoted firms in Nigeria. Indiana Journal of Economics and Business Management, 4(1), 1-14. Akani, H. W. (2024). Exchange rate fluctuations and performance of small and medium scale enterprises in Rivers State, Nigeria. British International Journal Applied Economics, Finance and Accounting, 8(1), 1-25. Akani, H. W. (2024). Debt financing and net profit margin of quoted consumer goods manufacturing firms in Nigeria. Advance Journal of Banking, Finance and Investment, 8(1), 1-26. Akani, H. W. (2024). Politics of currency redesign on the growth of small and medium scale enterprises in Rivers State, Nigeria. Advance Journal of Management, Accounting and Finance, 9(1), 1-13. Akani, H. W. (2023). Effect of financial plan on the performance of quoted food and beverages manufacturing firms in Nigeria. African Banking and Finance Review Journal , 7(7), 1-19. Akani, H. W. & Ede, Q. C. (2025). Asset pricing, financial leverage and market valuation of quoted consumer goods manufacturing firms in Nigeria, Economics and Social Sciences Academic Journal, 7(12),1-24 Akani, H. W., & Lucky, A. L. (2023). Ponzi scheme and poverty alleviation: An empirical study from Rivers State, Nigeria. Developing Economy Journal 9(11), 1-24. Akani, H. W., & Rogers-Banigo, I. (2023). Digital finance transactions and the stability of Nigeria financial markets. European Journal of Accounting, Finance and Investment, 9(11),17-37. Akani, H. W., & Lenyie, L. (2023). Prudential factors and quoted commercial banks capital adequacy in Nigeria. International Journal of Economics and Financial Management , 8(6),79-103. Akani, H. W. (2023). Electronic payment system and the returns of equity of quoted commercial banks in Nigeria, African Banking and Finance Review Journal , 5(5), 96-114. Akani, H. W. (2023). Banking sector reform and financial performance of deposit money banks in Nigeria. Nigerian Journal of Management Sciences 24(1b), 352-362. Akani, H. W., Godwin. N., & Lucky, A. L. (2023). Risk taking and financing decision of quoted consumer goods manufacturing firms in Nigeria. Journal of Banking and Finance, 7(1), 82-97 Akani, H. W., Ejire, E., & Boma-Oruwari, T. A. (2023). Pecking order hypothesis, capital structure and market valuation of quoted alternative security market firms in Nigeria. Journal of Banking and Investment, 1(1), 14-34. Akani, H. W., Azubuike, F. C., & Lucky, A. L. (2023). Investors sentiment and stock prices of quoted manufacturing firms in Nigeria. Nigerian Journal of Financial Studies , 3(4), 129-145. Akani, H. W., Ogolo, A., & Sarakiri, J. A. (2023), Digital banking and efficiency of quoted commercial banks in Nigeria. RSU Faculty of Management Sciences Journal of Investment and Finance Research, 1(1), 1-18. Akani, H. W., Amadi-Oparali, B. N., & Ajinwo, B. (2022). Determinants of loan loss provisions of quoted commercial banks in Nigeria. A multi-variant panel analysis. Nigerian Journal of Financial Studies, 2(3), 1-19. Akani, H. W., Azike, P. N., & Nwonodi, I. D. (2022). Macroeconomic risks and stock prices of quoted financial institutions in Nigeria. Nigerian Journal of Financial Studies , 2(3), 54-69. Akani, H. W., & Sarakiri, J. A. (2022). Dividend policy and profitability of quoted food and beverages firms in Nigeria. Nigerian Journal of Management Sciences, 23(2), 102-115. Akani, H. W., & Lucky, A. L. (2022). Bankometer appraisal of commercial banks soundness in Nigeria. Contemporary Journal of Banking and Finance 2(12),1-13. Akani, H. W. (2022). Insurance intermediation and capital formation in Nigeria. Banking and Insurance Academic Journal, 2(12), 1-18. Akani, H. W. (2022). Financial dualism and rural income earners in Port-Harcourt city local area, Rivers State, Nigeria. Merit Research Journal of Accounting, Auditing, Economics and Finance, 5(1), 001-015 Akani, H. W., & Ezebunwa, J. (2021). International liquidity channel and performance of commercial banks in Nigeria. Journal of Economics, Finance and Management Studies, 4(9), 1740-1752. Akani, H. W., & Agilebu, M. O. (2021). Debt financing and net book value of quoted small and medium scale enterprises in Nigeria. RSU Faculty of Management Sciences Journal of Investment and Finance Research, 1(1), 64-82. Akani, H. W., Uchechukwu, U. & Ezebunwo, J. (2021). Macroeconomic variables and net present value of quoted food and beverages firms in Nigeria. Journal of Banking and Finance, 5(1), 136-152. Akani, H. W., & Chittey, A. (2021). Financial policy variables and internal rate of return of quoted consumer goods manufacturing firms in Nigeria. Journal of Banking and Finance, 5(1), 57-75. Akani, H. W., & Nathaniel, J. I. (2021). Corporate funding and market capitalization value of quoted industrial goods manufacturing firms in Nigeria. Nigerian Journal of Financial Studies, 1(1), 60-75. Akani, H. W., Azubuike, F. & Ezebunwo, J. (2021). Corporate disclosure and return on equity of quoted manufacturing firms: Empirical analysis from Nigeria. Nigerian Journal of Financial Studies, 1(1), 60-75. Akani, H. W., & Ezebunwo, J. (2021). Risk management practices and shareholders returns using evidence from quoted commercial banks in Nigeria. African Journal of Economics and Sustainable Development 4(3),116-140. Akani, H. W., & Anyamaobi, C. (2021). Capital structure and financial performance of small and medium enterprises in Nigeria. European Journal of Accounting, Finance and Investment, 7(8), 1-22 Ekemere, A. A. & Akani, H. W. (2020). Treasury single account and public fund management in federal government agencies in Rivers State. Journal of Accounting Research, 6(2), 112- 120 Onyuku, K. S., Ohaka, J & Akani, H. W. (2025). Effect of international maritime trade on vessel turnaround time of ports in Nigeria. (1990-2026), International Journal of Progressive Research in Engineering Management and Science, 5(10), 814-842 Ayieko, V. N., Aluoch, M. O. (2025). Credit risk management and profitability of commercial banks in Nairobi City County, Kenya. International Academic Journal of Economics and Finance | ISSN 2518-2366, 4(4)188-222. Batekele, H. and Maseka, L. (2025) The effect of credit risk management on the bank’s profitability: The evidence from commercial banks in democratic republic of the Congo. Open Journal of Business and Management, 13, 2143-2162. Bob-Manuel, G. B., Triumph, H., & Onuabi, E. J. (2026). Estimated model of financial intermediation and net profit margin of quoted commercial banks in Nigeria. UKR Journal of Economics, Business and Management (UKRJEBM), 2(2), 115-128. Cynthia N., & Brian, M. (2025). The impact of credit risk management on financial performance of commercial banks: A case study of AB bank Zambia. World Journal of Advanced Research and Reviews, 2025, 26(01), 1464-1474 Dada, S. O., & Olajide, D. S. (2023). Implication of financial intermediation on credit risk management in Nigerian banking industry. Nigerian Journal of Banking and Financial Issues , 9(1), 14-39. Ejem, C.A., & Udochukwu, G.O. (2021). Financial conditions index and economic Albulescu, C. (2019). Forecasting the Romanian financial sector stability using a stochastic Simulation model. Romanian Journal of Economic Forecasting, 1(4), 56-78. Gitonga, R. W., Kalunda, E., & Wambalaba, F. W. (2024). Influence Of Asset Quality On The Financial Performance Of Insurance Companies In Kenya. The University Journal, 6(2), 56-66 Igbinosa, S. O. & Naimo, F. A. (2020). Capital adequacy and bank stability/soundness in sub- Sahara Africa. European Journal of Accounting, Finance and Investment, 6(5), 38-54. Kabundi, A., & Mbelu, A. (2020). Estimating a time-varying financial conditions index for South Africa. Empirical Economics, 1-28. Muthoni, M. I., Mwangi, L. W., & Muathe, S. M. (2020). Credit Management Practices and Loan Performance: Empirical Evidence from Commercial Banks in Kenya. International Journal of Current Aspects in Finance, Banking and Accounting, 2(1), 51-63. Ncube M (2019). Efficiency of the banking sector in South Africa. University of the Witwatersrand, South Africa Ng’humbu, N. B. (2025). The impacts of deposit growth on the profitability of commercial banks in Tanzania: A case of CRDB Bank Plc, Arusha City Council. African Quarterly Social Science Review, 2(4), 121–129. Retrieved from Ngari, P. (2021). Effect of Loan Products on Asset Quality of Commercial Banks in Kenya (Doctoral dissertation, KCA University). https://repository.kcau.ac.ke/bitstream/handle/123456789/650/ Nkpe, G. (2026). Bank Functions and Financial Performance of Quoted Commercial Banks in Nigeria. Journal of Accounting and Financial Management ISSN 2504-8856 www.iiardpub.org Ogbonna, U. G. & Ejem, C. A. (2020). Economic performance and financial conditions index nexus: Evidence from selected sub-Saharan African countries. Journal of Finance and Accounting, 8(3), 158-189. Okereke, E, J., & Theophilus, B. (2021). Constructing a financial conditions index for emerging and developing countries: A static panel data approach. International Journal of Innovative Research & Development, 10(2), 136-141 Olaniyan, T. O. (2019). Interactive Effects of Remittances and Financial Sector Development on Economic Growth in Nigeria. Remittances Review, 4(1), 19-39. Oyebowale, A. Y. (2020). Determinants of Bank Lending in Nigeria. Global Journal of Emerging Market Economies, 12(3), 378-398. Roselyne, A., Mackton, W., & Kiganda, E. (2022). Asset Quality And Financial Performance Of Tier Iv Commercial Banks In Kenya. European Journal Of Economic And Financial Research, 6(3), 1-16. Rwechungura, K., & Kaleshu, J. (2020). Stability and Profitability of Commercial Banks in Tanzania. East African Journal of Social and Applied Sciences [EAJ-SAS], 2(1), 76-87 Sarakiri, J. A., & Akani. H. W. (2021). Modeling commercial banks earnings in Nigeria's post consolidation era. Contemporary Journal of Finance and Risk Management 1(1), 1-12. Sunday, D, Onyeka, C. M. & Ugorji, C. N. (2024). Financial Management Practices and Profitability of Listed Deposit Money Banks in Nigeria. Journal of Accounting and Financial Management Uddin, M. K. (2022). Effect of leverage, operating efficiency, non-performing loan, and capital adequacy ratio on profitability of commercial banks in Bangladesh. European Journal of Business and Management Research, 7(3), 289-295 Uremadu, B.O. (2024). Effects of deposit mobilization on financial performance (Profitability) of Microfinance Banks in Nigeria. AKSU Journal of Administration and Corporate Governance, 4(1), 1-22.
More Articles from IIARD INTERNATIONAL JOURNAL OF BANKING AND FINANCE RESEARCH
Effect of Monetary Policy on Profitability of Deposit Money Banks in Nigeria
Author: Stephanie Nguhemen Gbande, Mike T. Soomiyol, Timothy Tyona, Gaius Msendoo Asombo
Asymmetric Effects of Monetary Policy and Exchange Rate on Commercial Bank Profitability in Nigeria: Evidence from a Nonlinear ARDL Approach
Author: Simeon Oamen Obode and Benneth Kiyentei Gini
Examining the Impact of Corporate Social Responsibility on Financial Performance: Evidence from Small and Medium-Sized Enterprises in Hanoi
Author: Nguyen Mai Phuong
Cognitive Diversity and Performance of Deposit Money Banks in Nigeria
Author: 1Nwangwu, Okwudiri Iheanyi, 2 Pepple, Grace Jamie PhD
A Theoretical Review of Internal Control System on Cyber Risk Management in Nigerian Banks
Author: Atelhe Joy Sekele