Agent Banking and the Profitability of Deposit Money Banks in Nigeria

This study empirically examined the impact of agent banking on the profitability of Deposit Money Banks (DMBs) in Nigeria using secondary time-series data covering a 10-year period from 2015 to 2024. Grounded in Agency Theory (Jensen & Meckling, 1976) and Financial Innovation Theory (Silber, 1983), the study disaggregated agent banking into three core operational proxies: Number of POS Agents (lnNPA), Volume of Transactions (lnVOL), and Value of Transactions (lnVAL), while bank profitability was operationalised strictly through Return on Assets (ROA). Utilising an ex-post facto research design, the specified multiple regression model was estimated using the Ordinary Least Squares (OLS) technique. Empirical results revealed that the Number of POS Agents (β1 = 0.0821, p = 0.0389) and the Value of Transactions (β3 = 0.1143, p = 0.0283) exerted positive and statistically significant effects on DMB Return on Assets at the 5% significance level. Conversely, the Volume of Transactions (β2 = 0.0315, p = 0.4826) showed a positive but statistically insignificant impact on ROA, driven by high operational switching fees and aggregator commission splits. The explanatory variables jointly accounted for 94.12% of the total variation in ROA (R2 = 0.9412, F = 31.9841, p =0.0004), confirming the overall statistical significance of the model. The study concluded that scaling agent distribution networks and capturing monetary liquidity flows serve as key structural drivers of corporate asset returns. It is recommended that bank management strategically expand agent networks into underserved regions, restructure aggregator commission frameworks to optimise unit transaction costs, and introduce higher-value agency products to drive retail float mobilisation.