The Effect of Non-Interest Income on The Financial Performance of Deposit Money Banks Listed in Nigeria

Despite the rising importance of Non-Interest Income (NII) in global banking, its precise effect on financial performance remains inadequately explored within the Nigerian context. While existing studies acknowledge the stabilizing potential of NII, they often fail to evaluate how specific dimensions of bank performance— profitability, liquidity, and efficiency—have responded to variations in NII. This gap creates ambiguity about whether NII enhances core financial outcomes or simply supplements traditional income. Motivated by this gap, the study examined the effect of NII on the financial performance of listed deposit money banks (DMBs) in Nigeria from 2014 to 2023. Using an ex-post facto design, secondary data were gathered from the annual reports of listed banks, Central Bank of Nigeria (CBN) publications, and the Nigeria Deposit Insurance Corporation (NDIC). The analysis employed regression, Pearson correlation, and ANOVA techniques. The findings revealed that NII significantly boosts profitability (ROA, p = 0.016) and liquidity (ATR, p = 0.000075), while also improving efficiency by reducing operating costs (CIR, p = 0.016). These results align with financial intermediation and diversification theories. The study recommended expanding digital fee-based services, leveraging stable NII sources, and adopting cost-efficient technology to drive sustainable performance and resilience across Nigeria's banking sector.