Bank Transaction Charges and Profitability of Selected Consumer Goods Companies in Nigeria

Abstract

This study examined the effect of bank transaction charges on the profitability of selected consumer goods companies in Nigeria from 2012 to 2024. Bank transaction charges were disaggregated into four components: card-related charges, electronic transfer charges, overdraft interest charges, and current account maintenance charges. Profitability was measured primarily by Return on Assets (ROA). The study was anchored Transaction Cost Economics theory. A sample of 10 listed consumer goods companies was selected using purposive sampling, and panel data covering 2012–2024 (130 firm-year observations) was analysed using descriptive statistics, correlation analysis, and panel regression (fixed and random effects). The Hausman test determined the preferred model for each hypothesis. The findings revealed that all four categories of bank transaction charges have statistically significant negative effects on profitability when tested individually. Electronic transfer charges had the largest economic impact, with a coefficient of -0.11 in the fixed effects model, meaning that a one-million-naira increase in electronic transfer charges reduces ROA by 0.11 percentage points. The full model showed that electronic transfer charges and overdraft interest charges remained significant even when all categories were included together. The study concluded that bank transaction charges, particularly electronic transfer fees, significantly reduce the profitability of consumer goods companies in Nigeria. Recommendations include payment batching by corporate financial managers, introduction of corporate transaction packages by banks, and review of electronic transfer fee structures by the Central Bank of Nigeria.