JRFM, Vol. 18, Pages 211: Sustainable Banking and Bank Stability in Nigeria: Empirical Evidence from Deposit Money Banks

Journal of Risk and Financial Management doi: 10.3390/jrfm18040211

Authors:
Olusola Enitan Olowofela
Hermann Azemtsa Donfack
Celestin Wafo Soh

We investigated the impact of sustainable banking practices on bank stability in the Nigerian banking sector. We focused on data from 2012 to 2022, which were extracted from the balance sheets of deposit money banks in Nigeria. We employed the Dynamic Ordinary Least Squares (DOLS) estimator with E-Views to analyze the data. Our findings show that environmental emissions and waste reduction have minimal effects on bank assets, capital adequacy, and liquidity, though they do not directly cause financial instability. Investments in environmental innovation reduce asset growth and increase liquidity constraints but lower non-performing loans, emphasizing a trade-off between sustainability and stability. Environmental resource use efficiency remains neutral regarding asset stability and capital adequacy but poses liquidity challenges. Social welfare investments have little impact on asset growth and profitability, potentially reducing financial stability. Human resource development improves capital adequacy and liquidity strengthening bank stability, while community investments aid societal growth but create liquidity pressures. Macroeconomic factors like GDP growth and inflation are significant, yet economic growth does not always increase bank assets, whereas inflation increases non-performing loans. Sustainable banking in Nigeria is evolving; therefore, there is a need for robust regulation, financial incentives for compliance, a high level of awareness, and alignment between banking operations and sustainability principles.

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Olusola Enitan Olowofela www.mdpi.com