Domestic economic fundamentals play a vital role in determining the performance of stock market and stock returns, and stock market being an important part of the financial system should have a systemic linkage with fundamentals of the economy. Scholars have used macroeconomic factors to explain stock returns and found that changes in some macroeconomic variables was associated with risk premium. But as major economic factors affecting the stock exchange operation, the impact on stock returns especially on financial institutions remains ambiguous. Therefore, the paper examined the effect of interest rate, exchange rate and inflation rate on stock returns of banks quoted on the Nigeria stock exchange, 2007 to 2017. Researchers applies ordinary least square regression, and results revealed that interest rate had negative and significant impact on stock returns, exchange rate had positive and insignificant impact on stock returns and inflation rate had negative and insignificant impact on stock returns within the time under review. Base on the findings, researchers' recommends that sectoral allocation of credits should be directly administered on the Nigeria stock exchange markets to curtail the high cost of capital arising from scarcity of funds, monetary authorities should design special exchange rate regime for investors in the Nigerian stock exchange markets to guarantee the value of returns on investment and mitigates the effect of exchange rate volatility on stock performance and plausible monetary policy tools should be utilized to control inflation and its negative effect on stock returns.