Effect of Financial Metrics on Risk Indicators in Nigeria Listed Deposit Money Banks

This study investigates the effect of financial metrics on risk indicators in Nigerian deposit money banks. The analysis employs yearly time series data spanning from 2007 to 2022, acquired from the Exchange Group PLC. Descriptive statistics, panel unit root tests, Hausman tests, and Panel Ordinary Least Squares (OLS) procedures were used at a 95% confidence interval. The study utilized secondary data sourced from the Exchange Group PLC database. The R-squared (0.564390) and Adjusted R-squared (0.540629) values indicate that the models have strong explanatory power. The results show that all variables are stationary at their levels (I(0)). The primary financial metrics influencing risk indicators among deposit money banks in Nigeria are revenue growth, net interest margin, and earnings per share. It was recommended that banks should implement effective risk management systems that can handle increased complexity and scale of operations, and regularly update them, leveraging blockchain technology for decentralized risk management as it relates to revenue growth rate of banks. Maintain a healthy net interest margin through effective risk management practices and internal controls, and utilize this strength to invest in risk mitigation measures, introducing incentive programs to encourage employee involvement in risk management. Conduct regular financial reviews and audits to ensure accurate earnings reporting and risk identification, utilizing AI-powered tools for earnings analysis to identify anomalies and potential risks. Prioritize prudent lending practices and effective risk management to maintain financial stability, implementing dynamic adjustments to the debt-to-equity ratio in response to changes in risk detection needs.