THE IMPACT OF SUSTAINABILITY PRACTICES ON THE FINANCIAL PERFORMANCE OF NIGERIAN BANKS

Abstract

Sustainability has become a strategic determinant of competitive advantage in the global banking industry, with growing evidence that robust environmental, social, and governance (ESG) practices can enhance profitability, risk management, and market reputation. The effects of sustainability practices on financial performance are under-researched, especially in Nigeria, where the banks are critical to the economic growth of the country. The paper studies how the ESG integration is linked to financial performance of Nigerian banks that are defined by evolving regulatory frameworks, growing stakeholder expectations and pressure on the environment and society. A mixed-method approach was employed, combining a panel-data econometric model with qualitative content analysis of ESG disclosures drawn from annual and sustainability reports, and Central Bank of Nigeria filings covering 2022–2024.Financial indicators analysed include Return on Assets (ROA), Return on Equity (ROE), Earnings per Share (EPS), and Total Assets, while ESG indices were constructed from measurable environmental, social, and governance parameters. Control variables comprised bank size, leverage, and macroeconomic factors. The findings reveal that profitability indicators, particularly ROE and EPS, are the dominant drivers of Profit Before Tax (PBT), with Total Assets playing a secondary, reinforcing role. Trajectories specific to banks show that GTCO achieves high PBT by maintaining and driving a high ROE and faster expansion of EPS, Zenith Bank experiences scale-driven earnings accretions, and Access Holdings attains consistently rising PBT in parallel with efficiency and governance improvements. UBA demonstrates strong profit growth supported by a steady expansion of total assets and above-average equity returns, while FirstBank shows consistent improvements in ROA, ROE, and EPS, reflecting the positive outcomes of governance-driven reforms and balance sheet consolidation. Correlation analysis indicates no significant link between bank size and profitability ratios, though slight negative trends in ROA and ROE suggest scale dilution effects.