ETHICAL CHALLENGES AND FINANCIAL PERFORMANCE IN THE NIGERIA BANKING SECTOR

Abstract

This study explored the ethical challenges that confronted deposit money banks in Nigeria and their impact on financial performance. Despite the adoption of corporate governance practices intended to promote ethical conduct, customers continued to express dissatisfaction with banking services, particularly regarding unauthorized deductions from their accounts without clear justification. Additionally, concerns were raised over insider credit approvals and inadequate disclosure of vital information, highlighting the need for a thorough investigation into certain industry practices. The research adopted an ex-post facto research design and focused on all 31 listed deposit money banks in Nigeria from 2003 to 2021. Secondary data served as the primary source of information, and a purposive sampling technique was employed to select relevant data points. Various statistical techniques, including descriptive analysis, correlation tests, regression analysis, and the autoregressive distributed lag (ARDL) model, were used for data interpretation with the aid of E-View 22.00 software. The findings revealed that insider credit practices had a significant and positive effect on banks' Return on Assets (ROA) in Nigeria. Similarly, the second hypothesis established that the non-disclosure of critical financial information also had a significant and positive influence on banks' ROA. Based on these findings, the study concluded that ethical challenges, including insider credit approvals and inadequate financial disclosures, played a substantial role in shaping the financial performance of Nigeria's banking sector. To address these concerns, it was recommended that the Central Bank of Nigeria (CBN) strictly enforce the revised 2018 corporate governance code to curb excessive insider credit approvals by bank executives and board members, thereby reducing the risk of non-performing loans. Additionally, banks that deliberately withheld crucial financial information from investors and shareholders, thereby preventing informed decision-making, were advised to face regulatory sanctions, including delisting from the stock exchange.