The Nigerian banking system exhibits fluctuating profitability compared to other countries in the world. This study examines the determinants of bank profitability in Nigeria. It relates internal bank specific and macroeconomic indicators to the overall profitability of Nigerian banks based on Return on Asset as the measure of profitability. The study uses a panel of individual banks’ financial statements from 2004 to 20012. According to the empirical results, Nigerian banks suffer from low quality of loans and do not monitor the repayment of the loans disbursed and more so, their assets cannot cover the amount of loan disbursed. This study also finds that macro economic variables do not have a major effect on bank profitability and inflation posed adverse effect on profitability. Most importantly, Sterling bank should react quickly to all the variables considered in this study, al nearly posed a negative influence on their profitability in that if these entire factors are properly monitored, they are likely to be better off in their performance. INTRODUCTION Banks as a financial institution has the major role of lubricating the gears facilitating the economic operations of a nation. The banking system plays a major role in moving funds from the saving units to the spending units. To mention a few, if a financial system is efficient, it should show improvements in profitability, increasing the volume of funds flowing from saver to borrowers, and provide better quality services for consumers. As financial intermediaries, banks play an important role in the operation of an economy. This is particularly true in the case of Nigeria where all other sectors have to relate with banks to carry out their operations effectively either as a debtor or creditor. Moreover, banks are the sole dealer of funds, and their stability is of great importance to the financial system. As such, an in depth understanding of determinants of their profitability is necessary and vital to the ability of an economy to resist crisis. In banking literature, the determinants of profitability are empirically well explored although the proxy of profitability varies among studies. Some employed, Return on Asset, Return on Equity, Net Interest Margin, Return on Average Asset and so on. The objective of this paper is to examine the contribution of bank-specific as well as macroeconomic factors to the variation in profitability across banks and over time in Nigeria. This paper will be structured into five sections; the next Kuwait Chapter of Arabian Journal of Business and Management Review Vol. 4, No.9; May. 2015 12 section will deal with the review of literature, followed by the methodology section. The fourth section will be the discussion and interpretation of result section and the last section will be concluding section of the paper. 2.0 EMPIRICAL LITERATURE Haron, (2004) using panel data regression analysis with inclusion of dummy variables in the study determinants of Islamic bank profitability found that liquidity had a significant positive relationship with total income received and profit, which is contrary to the findings of Guru, Stanton and Shanmugan (1999) in the study determinants of commercial banks profitability in Malaysia where they found that liquidity has a negative relationship with profit though not very significant. Haron (2004) also found no significant relationship between liquidity and profitability measures which were deflated against total capital and reserves. They also found a positive relationship between capital structure and profitability measures which were deflated against total asset. Capital structure has no significant relationship with total income which implies that additional capital cannot generate more income for banks. Guru et.al found expense management to be a main contributor to profitability performance in Malaysian banks. Also capital adequacy, inflation, loan component and investment in securities were found to have positive and significant impact on profitability. On the contrary, there was found to be a negative but statistically significant correlation between capital ratio, loan, discount rate, investment securities, share deposit, size of the banks of banks and profitability. While, deposits, interest expense, bank risk and bank reputation maintains a positive and significant relationship with profitability of US banking industry during the period 1995-2007 (Hoffmann, 2011). Bashir, (2003) in the study determinants of profitability in Islamic banks; evidence from Middle East, through panel regression analysis for fourteen Islamic banks between the year 1993 to 1998 found that capital adequacy, risk indicators, GDP, inflation and loan has strong, positive and robust link with profitability, but the relationship of capital adequacy, loan total asset with profitability is statistically insignificant. Contrarily, in Tunasian banks via balanced panel regression, capital adequacy, overhead to asset ratio, loan to asset post a significant and positive influence on profitability and GDP, inflation, size and non interest bearing asset ratio are insignificant in determining the profitability of Tunasian banks, though size has the most negative relationship with bank’s profitability (Naceur, 2003). In conjunction with the findings of Naceur (2003), Kusa and Ongore (2013) in the study, determinants of financial performance of commercial banks in Kenya using panel data multiple linear regression analysis found that capital adequacy and management efficiency has significant and positive relationship with return on asset (ROA), return on equity (ROE) and Net interest margin (NIM), which are all profitability measures. Inflation and asset quality also post a negative influence on profitability. While,GDP, liquidity management has positive but insignificant relationship with profitability measures except for GDP who had a positive but also insignificant influence on Net Interest Margin (NIM). Andrea (2012) in the study determinants of bank profitability in USA covering the period 20072011 found that cost to income ratio, funding cost, loan loss provision and leverage had a negative but significant influence on bank’s return on asset (ROA), while interest income share had positive and significant influence on financial performance of banks in USA. Also, Awo and Akoteye (2011) found in the study financial performance of rural banks in Ghana, specifically a case study of NAARA Rural bank that liquidity, size and loan has a positive and significant relationship with profitability at 95% confidence level. (see also Haron, 2004). While, non-performing loan is significant but negatively related to financial performance. Similarly, in the study bank specific and macroeconomic determinants of Turkey commercial bank profitability by Alper and Anbar (2011), bank size was found to be positively and significantly related to ROA and ROE, while loan to asset ratio has a negative but significant impact on profitability. Macro economic variables are not found to have a significant impact on ROA and no relationship at all with ROE. Kuwait Chapter of Arabian Journal of Business and Management Review Vol. 4, No.9; May. 2015 13 Ana, Blanka and Roberto (2011) in their study determinant of bank profitability in Croatia using Dynamic panel regression found that lagged ROA, growth of loan, equity to total asset, liquidity ratio, received deposit ratio and bank’s concentration indication has a positive and significant relationship with ROA. Only loan to deposit ratio post a negative but also significant relationship with ROA. Contrary to the findings of Alper et al, inflation and GDP showed a positive but insignificant impact on ROA and ROE and capital adequacy also shows a positive and significant relationship with with ROA and ROE (Ramadan, Kilani and Kadduni, 2011). Their findings is in conjuction with Darydenko (2010) ; Vong and Chan (2008); Francis( 2007) and Javaid, Anwar, Zanan, Gafor (2009). They used panel data regression analysis and found that capital adequacy is positively and significantly related to banks profitability. GAP IN LITERATURE The study has been researched by many authors but very scanty in Nigeria and all those who conducted this research work looked at it from the macro view, that is, they conducted the research and the analysis focus on the common coefficient by stacking all the banks together as one. This study will add to the body of knowledge by looking at the determinants of deposit money bank profitability in Nigeria from the micro aspect. That is, focusing on the cross-sectional specific in the panel regression from 2004 to 2012 using both bank specific and macro economic variables, therefore, showing the effect of each variable on individual bank. 3.0 Methodology 3.1 Data Sources and Description The data used for the study are secondary in nature. They are obtained from annual audited account and financial report of banks published in the Nigerian Stock Exchange fact book. A panel data of the total fifteen (15) quoted banks covering a period of nine (9) years was employed. The fifteen banks was selected because they are listed on the Nigeria Stock Exchange and they have their data readily available at the Nigeria Stock Exchange. The dependent variable is Return on Asset which is a proxy of profitability and it is defined as: Profit after tax