EFFECT OF CAPITAL ADEQUACY, FOREIGN EXCHANGE RATE AND OPERATIONAL RISKS ON FINANCIAL PERFORMANCE OF SELECTED LISTED DEPOSIT MONEY BANKS IN NIGERIA

Abstract

This study examined the effect of capital adequacy, foreign exchange rate and operational risks on financial performance of selected listed deposit money banks in Nigeria.  The study used an ex post facto design, targeting 19 listed deposit money banks in Nigeria as of 31st December 2022. A sample of 14 banks was purposively selected, meeting the criteria of being listed before 31st December 2014 and having complete annual reports for the 2014-2023 period. Descriptive statistics and regression analysis were used to analyze the data obtained. The study found that Capital Adequacy Ratio has positive and significant effect on the financial performance (Return on Assets) of the selected listed deposit money banks in Nigeria. while Foreign Exchange Rate Risk and operational risk has a positive but statistically insignificant effect on the financial performance (Return on Assets) of selected listed deposit money banks (DMBs) in Nigeria at 5% level of significant. The study concluded that capital adequacy ratio, foreign exchange rate risk and operational risks influence the financial performance of deposit money banks in Nigeria. The study therefore study recommends among others that deposit money banks in Nigeria should improve on their operational risk control by way of investing in internal controls system, adopting advanced technologies, and enhancing staff training to mitigate risks associated with human error, fraud, and system failures.