Effect of Non-interest Income on Banks’ Profitability in Nigeria

Nigerian deposit money banks are facing diverse challenges to remain profitable through the traditional interest income stream. The study examined the effect of non-interest income on the profitability of deposit money banks' in Nigeria between 2006 and 2015. Five out of the 21 banks in the category were purposively selected based on the numerical strength of their customers, volume of transactions, geographical spread and accessibility to balanced secondary data especially on the internet. Using ex-post facto research design, secondary data were collected from the banks’ published annual financial reports. Percentages and multiple regression analysis were used for data analysis. The result showed that the variations in the linear combination of total non-interest income, liquidity ratio, prime lending rate and inflation for the banks explain 61.5% of the changes in profitability. It revealed that non-interest income is a significant predictor of profitability since p- value for this coefficient is statistically significant (p<0.001). The study concluded that non-interest income has a positive and significant effect on deposit money banks' profitability but the growth rate has been inconsistent. Based on the findings of the study, it was recommended that deposit money banks should benchmark their competitors and be ready for continuous improvement of their products and services to generate more non-interest income to boost profitability.