FACULTY OF MANAGEMENTS SCIENCES

This study investigates the effect of interest rate fluctuations on the performance of deposit money banks in Nigeria over the period 1981 to 2023. Specifically, the study examines the impact of lending interest rate (LIR), deposit interest rate (DIR), and interest rate volatility (IRV) on bank performance, measured by aggregate return on assets (ROA). Time-series data sourced from relevant financial and institutional databases were analysed using the Robust Least Squares (RLS) estimation technique, which accounts for heteroskedasticity and specification errors. The findings reveal that lending interest rate has a statistically significant positive effect on bank performance, while interest rate volatility exerts a significant negative influence. In contrast, deposit interest rate does not significantly affect performance. Based on these findings, the study recommends the implementation of flexible but well-structured lending rate policies to support bank profitability, dynamic deposit pricing strategies to improve funding stability, and consistent monetary policy frameworks to minimise interest rate volatility and promote financial system resilience.