Offshore Banking and the Financial Performance: A Study of Selected Nigerian Banks with Offshore Branches

Some Nigerian banks have found it worthwhile to extend their branch expansions to some offshore locations. However, this move also made the Central Bank of Nigeria to issue a circular in 2008 to all Banks to ensure the viability of the offshore branches while protecting the shareholders’ funds and interests. The study employed ex post facto research design, descriptive and empirical analysis methods. Analyses were based on published data on relevant performance index of the banks and operating indices of their offshore branches. Three banks were selected for the study from the seven banks that operated offshore branches. Data were extracted from the annual reports for 2009-2012 period. Empirical analysis was anchored on regression model. Profit before tax was treated as the performance index and, thus, entered the model as the explained variable while operating income, deposits, loans and advances, other assets and profit before tax of the offshore branches entered as the explanatory variables. The intercept of the model and the coefficients of the operating indices were estimated via the Least Squares (LS) techniques. The results revealed that banks recorded varying values in offshore operating indicators. Ghana proved to be a more lucrative location for banking business. Operating incomes and deposits did not significantly affect the profit before tax of the banks as evidenced by the p-values of the t-statistic of their coefficients (p-value = 0.1309 > 0.05 and p-value = 0.3311 > 0.05) respectively, and that loans and advances exerted negative but insignificant effect as shown by the p-value of 0.8594 which was less that the relevant level of 0.05. The aggregate effect of the operating indices was found to be significant. The operating indicators exhibited high strength (99%) in explaining variations in performance of the parent banks as evidenced by the very high R-Squared 0.99. Consequently, the study concluded that offshore banking possesses great potentials to determine and explain banks’ performance. Recommendations, amongst others, were that Nigerian Banks currently operating offshore branches should deepen their banking business for optimal performance. The Central Bank of Nigeria should enhance its supervisory capacity with additional monitoring strategies. Key Words: Offshore Branches, Operating Indices, Performance Index, Financial Performanc

Liquidity Risk and Profitability of Listed Deposit Money Banks in Nigeria

Illiquidity of firms especially banks can lead to loss of businesses thereby reducing the potentials of earnings and profitability; this is because high liquidity position of a firm helps it to meet with some obligations which lead to funding of loans and advances that could aid banks to earn income in the form of interests on loans. The study examined the effect of liquidity risk on financial performance of listed Deposit Money Banks (DMBs) in Nigeria covering a period of ten years (2009-2018).This study adopted an ex-post facto research design.  The population of the study was 15 deposit money banks listed on the Nigerian Stock Exchange and employed panel regression analysis with emphasis on pooled, fixed and random effect models. Secondary data were sourced from the annual reports of the 14 selected quoted banks in Nigeria. The Hausman test was used to justify the appropriate model and inferences were made at 5 percent significant level.  The findings revealed that Liquidity risk had significant effects on profitability. In particular, it was established that Liquidity risk indicators had positive and significant effects on individual profitability variables; viz: Return on equity of deposit money banks in Nigeria (β = 49.76, p = 0.000), Return on Assets (β = 12.87, p = 0.005) and Earnings per share (β =20.92, p = 0.000). The study concluded that Liquidity risk has significant effect on return on equity, return on assets and earning per share of deposit Money Banks listed in Nigeria. The study, therefore, recommended that management of banks should establish strategies to better manage their cash-flows in each product segment and maintain an optimal levels in order to earn higher returns from high volume of idle cash balances. Key words: Earnings per share, Liquidity risk management, Return on assets, Return on equity, Nigeria. Word Count: 284 words. DOI: 10.7176/RJFA/11-8-13 Publication date: April 30th 2020

Capital Structure and Profitability of Downstream Oil and Gas Firms Listed in Nigeria

The Nigerian downstream oil and gas sector in the last few years have witnessed a plethora of challenges such as infrastructural decay, rising cost of importation of petroleum products (fuel, diesel, aviation fuel and kerosene) which is a fallout of breakdown of the nation’s refineries. The study examined the impact of capital structure on the profitability of firms in the downstream sector of the oil and gas industry in Nigeria from 2000 to 2018. This study adopted an ex-post facto research design. The study employed a dynamic panel system equation of generalized method of moment. Secondary data were sourced from the annual reports of the 8 selected oil and gas companies listed in Nigeria. The study applied descriptive statistics, correlation, and unit root test as well as inferential statistics. Inferences were made at 5 percent significant level. Results showed that Debt Capital ratio had a negative and significant relationship with ROA (β = -0.0257, t=-5.147, p<0.05). Also, Equity Capital ratio had a positive and significant relationship with current ROA (β = 0.228, t=5.3015p<0.05). Lastly, Interest Rate had a positive and insignificant relationship with current ROA (β = 0.247, t=4.3521, p<0.05). The study concluded that while debt capital ratio had a significant inverse effect on firms’ profitability, equity capital ratio had a positive and significant effect on the profitability of the selected oil and gas firms. The result also affirmed that interest rate had a positive and insignificant effect on profitability of selected oil and gas firms. The study recommended that Oil and Gas sector should increase equity financing and reduce debt financing. This equity can be enhanced through increased in the amount of ploughed back profit/retained earnings and bonus issue. Word counts: 281 Keywords: Capital Structure, Profitability, Equity capital ratio, Debt Capital ratio DOI: 10.7176/RJFA/11-8-02 Publication date: April 30th 202

What Drives Foreign Direct Investment Inflows in China? ARDL Bound Tests and ECM Approach

This paper examines the variables that drive foreign direct investment in Chinese economy. Recent past studies have shown conflicting results which make further study on this subject matter imperative in the recent times. Data were collected from the United Nations Conference on Trade and Development and World Bank Indicator from 1990– 2017 and the study employed the Autoregressive Distributed Lag (ARDL) model and Error Correction Model (ECM) to address its objective. Consequently, the major findings that originated from the work could be submitted as follows. The result of ECM term confirmed that about 19% of the total disequilibrium in the previous year would be corrected in the current year. Meanwhile, the principal drivers of FDI inflows in China are the large market size and impressive growth rate of the economy. However, GDP per capita could not derive FDI inflows in China. Based on the findings that emerged in this work, it is mandatory this paper makes these recommends for both the policy makers and the future researchers in China that whenever sporadic inflows of FDI is the target of the policy makers in this country, the Chinese government should manipulate the market size and growth rate of its economy.&nbsp