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.