The principle of diversification tells us that “spreading an investment across many assets will eliminate some of the risks but not all of the risks. Bank as a body corporate involves in diversification by investing in stocks of various companies across different sectors, industries, nationally, regionally and even internationally in order to reduce exposure to risks. This research is similar to other researches but while the earlier researches avoided inclusion of firms whose primary businesses were financial services, this research is based on firms whose primary businesses are financial services – with particular interest on Nigerian banks. As an analytical research, all manners of tools (mathematical, econometric, statistical etc,) were employed in the appraisal of data with the aim of establishing relationships and drawing conclusions. The study relied on historic accounting data generated from financial (annual) reports and accounts of sampled banks between the period 1998 and 2007 (a ten-year period). We found out that there is a significant difference (in performances) between the values of diversified banks and standalone banks. The diversified banks in Nigeria are more enhanced in value than the standalone banks, and that diversification in Nigerian banks impacts significantly on the market value of the banks. It is therefore recommended that while firms diversify, the focus should be more on firms that have similar services or products, bearing in mind that diversifying into conglomerates makes management more difficult.