Risk Management Practices and Investment Returns of Deposit Money Banks in Nigeria

This study examined the effect of risk management practices and investment returns of deposit money banks in Nigeria. Risk management practices proxied with Credit Risks (CR), Liquidity Risks (LR), Operational Risks (OR) and Market Risks (MR) (Independent Variables) are examined on how it influences the investment returns proxied with Net Interest Margin (NIM) (Dependent Variable) of deposit money banks in Nigeria. The study was carried out in Nigeria for the period of 1994-2023 (30years). The study made used of secondary data (Time Series) which was sourced from the Nigeria Deposit Insurance Corporation (NDIC) Annual Reports, CBN Annual Report and CBN Bank Supervisory Annual Report for the duration of the study on the variables under study. The data was analyzed with descriptive statistics, correlation, variance inflation test, diagnostics tests, unit root test, Johannsen cointegration test followed by ordinary least multiple regression analysis, using the computer software, E-VIEW 9.0. The findings revealed that CR, LR and OR has positive and significant effect on NIM of DMBs in Nigeria while MR does not. The study concluded that risk management practices have significant effect on investment returns of deposit money banks in Nigeria. Also, banks should implement robust credit risk assessment frameworks to minimize defaults and enhance their interest income. This could include better credit scoring models and more stringent lending criteria. This study contributes to the existing body of knowledge by providing empirical evidence on the relationship between various risk factors and net interest margin in the context of Nigerian banks.