Financial sector sustainability and performance – Policy Imperative for the monetary authorities'

Purpose The objective of this study is to ascertain whether financial sector sustainability had any correlation with financial sector performance in Nigeria and recommend appropriate policy directions. Design/methodology/approach The study selected four major Nigerian banks namely Zenith Bank Guaranty Bank United Bank for Africa and First Bank of Nigeria as its sample and covered 2010 to 2019. Secondary panel data were obtained from the published financial Statements of the banks and subjected to analytical techniques of panel unit root tests descriptive statistics panel least square and Co-integration statistical techniques at the 5% level of significance. Findings The findings revealed that the exogenous variables (SUST) have significant Impact on the endogenous variable (ROA, ROE) in the short-run but insignificant in the long run. Research limitations/implications The period covered was limited to 10 years and has an African development focus with emphasis on West Africa, Nigeria. However, the implication could be general to most or all economic and financial landscape. It shows that there is a correlation between financial sector sustainability and return on assets and returns on equity. Practical implications Monetary authorities should develop applicable annual performance sustainability framework for all banks; and set performance targets, that will be measured and monitored by appropriate regulatory unit periodically. Social implications The financial sector survival is directly related to its contribution towards the survival and development of its host community and operating environment. Originality/value This approach is novel in the sense that its approach is practical and measurable, which most research work have not focused on. 1 Appendix A: Financial metrics table – Zenith Bank Plc, covering 2010–2019 No content 2 Appendix B: Financial metrics table – United Bank for Africa Plc, covering 2010–2019 No content 3 Appendix C: Financial metrics table – First bank Plc, covering 2010–2019 No content 4 Appendix D: Financial metrics table – Guarantee Trust Bank Plc, covering 2010–2019 No content 5 Appendix E: Table 3 – Panel least square result Table 3 Panel least square result Dependent variable: ROA Method: Panel EGLS (period weights) Linear estimation after one-step weighting matrix Period weights (PCSE) standard errors and covariance (df corrected) Variable Coefficient Std. Error t -statistic Prob C −0.009768 0.004582 −2.131614 0.0564 SUST (−3) −0.003462 0.001381 −2.506751 0.0292 DEBR (3) −0.003988 0.000613 −6.505235 0.0000 FIRS (3) 0.358465 0.035932 9.976089 0.0000 Source(s): E-views 10 Computation of the author(s) ( Table A5 ) 6 Appendix F: Table 5 – Panel least square result Table 5 Panel least square result Dependent variable: ROE Method: Panel least squares Period weights (PCSE) standard errors and covariance (d.f. corrected) Variable Coefficient Std. Error t -statistic Prob C 0.232693 0.052665 4.418328 0.0008 SUST (−2) −0.088454 0.029304 −3.018509 0.0107 DEBR (3) −0.036887 0.007948 −4.641208 0.0006 FIRS (−3) 0.708341 0.300934 2.353805 0.0365 Source(s): E-views 10 Computation of the author(s) ( Table A6 )