Research Article

PORTFOLIO OPTIMISATION AND FINANCIAL PERFORMANCE OF DEPOSIT MONEY BANKS IN NIGERIA: AN EMPIRICAL ANALYSIS OF ASSET ALLOCATION, DIVERSIFICATION, AND RISK MANAGEMENT

Ngbede Adikwu Ocholi1*, Maryam Abdu1, Yusuf A. Hashim1
1 Department of Business Administration, Kaduna State University
* Corresponding author: ngbedeocholi@gmail.com
Published: Dec, 2025
DOI: 10.68022/kbmr.2025.3ryqfpqs
Pages: 67-81
Views: 19
Downloads: 4

Abstract

This study examines the effect of portfolio optimization, specifically asset allocation, portfolio diversification, and risk management, on the financial performance of deposit money banks in Nigeria between 2014 and 2023. Grounded in Modern Portfolio Theory (MPT) and extended through hybrid models like the Black-Litterman framework and AI-driven simulations, the study uses a multiple regression approach to analyze data from five systemically important banks. Findings reveal that only portfolio diversification has a statistically significant positive impact on performance, measured by Return on Assets (ROA), while asset allocation and risk management exhibit non-significant effects. These results underscore the critical importance of income diversification in enhancing profitability and resilience in Nigeria's volatile financial ecosystem. The study contributes a context-sensitive framework that links global portfolio theories with the operational realities of emerging market banking. It recommends that banks adopt dynamic asset models, improve real-time risk monitoring, and leverage data infrastructure for optimal performance. Policymakers are also urged to support innovation and data-driven practices to improve financial stability.

Keywords

Portfolio optimisation Asset allocation Portfolio diversification Risk management Bank performance Nigeria Return on Assets (ROA) Modern Portfolio Theory

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How to Cite

Ocholi, N. A., Abdu, M., & Hashim, Y. A. (2025). PORTFOLIO OPTIMISATION AND FINANCIAL PERFORMANCE OF DEPOSIT MONEY BANKS IN NIGERIA: AN EMPIRICAL ANALYSIS OF ASSET ALLOCATION, DIVERSIFICATION, AND RISK MANAGEMENT. Kaduna Business and Management Reviews, 6(2), 67-81. https://doi.org/10.68022/kbmr.2025.3ryqfpqs

N. A. Ocholi, M. Abdu, and Y. A. Hashim, "PORTFOLIO OPTIMISATION AND FINANCIAL PERFORMANCE OF DEPOSIT MONEY BANKS IN NIGERIA: AN EMPIRICAL ANALYSIS OF ASSET ALLOCATION, DIVERSIFICATION, AND RISK MANAGEMENT," Kaduna Business and Management Reviews, vol. 6, no. 2, pp. 67-81, December 2025. doi: 10.68022/kbmr.2025.3ryqfpqs

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