This study investigates how different categories of financial risks affect the profitability of Deposit Money Banks (DMBs) listed on the Nigerian Stock Exchange. Secondary data were extracted from the audited annual reports and financial statements of thirteen banks covering the period 2016–2024. Profitability was measured using return on assets (ROA), while the explanatory variables included credit risk, liquidity risk, market risk, and operational risk. A panel regression approach was applied, with the Feasible Generalized Least Squares (FGLS) estimator selected after diagnostic tests confirmed its suitability. The results show that credit risk and operational risk exert significant negative effects on bank profitability, highlighting the impact of non-performing loans and operational inefficiencies on earnings. Market risk, measured by inflation, also has a negative influence, although its effect is relatively modest. Liquidity risk, however, was not found to have a statistically significant relationship with profitability during the study period. The findings suggest that Nigerian banks remain most vulnerable to loan defaults, cost inefficiencies, and macroeconomic instability, even though liquidity management appears to have improved. The study recommends that banks strengthen credit appraisal and monitoring systems, invest in technology to improve efficiency, and adopt hedging strategies to manage market volatility. By prioritizing these areas, DMBs can improve resilience, safeguard profitability, and enhance stakeholder confidence in the Nigerian banking sector.
Yusuf et al. (2025) studied this question.