Analysis of Bank Effectiveness in Nigeria
Downloads
The objective of the paper is to analyse the effectiveness of Deposit Money Banks (DMBs) in Nigeria in the period following the 2005 consolidation exercise in the banking sector. In this study, declining interest rates margins and increasing private sector credit have been used to proxy effectiveness. To achieve this objective, econometric and statistical tools are utilized to analyse annual times series data spanning the period from 2005 to 2013 on the 18 Deposit Money Banks that are quoted on the Nigerian Stock Exchange (NSE). The analysis indicates that commercial banks in the country within the sample period were generally very effective as it finds significant positive relationship between credit extended to the private sector and the banks’ interest margins. The study therefore recommends intensification of effort by the DMBs towards increasing credit extended to the private sectors. To this end there is need to mobilize more funds from the public in form of deposit which is the main determinant of loans and advances extended by lending financial institutions. It is also recommended that DMBs should ensure that loans are extended to borrowers who are credit-worthy, so as to reduce significantly, the incidence of repayment defaults and bad debts.
Abuga, I. M. and Manyange, M. N. (2015). Effectiveness of Mobile Banking Services in Selected Commercial Banks in Rwanda. Journal of Applied Business and Economics, 3(2), 49-60.
Adeyemi K. S. (2005). Banking Sector Consolidation in Nigeria; Issues and challenges. Review of Industrial Organization 12, 95-135.
Aigheyisi, O. S. and Oaikhenan, H. E. (2014). An Econometric Investigation of the Determinants of Commercial Banks’ Loans and Advances to the Private Sector in Nigeria. African Journal of Microfinance and Enterprise Development, Volume 4(2), December, 46-66.Central Bank of Nigeria (2013). Statistical Bulletin, Abuja: CBN
Ferhi, A. and Chkoundali, R. (2015). Comparing Effectiveness between Islamic and Conventional Banks during the Current Crisis. Intel Prop Rights 3: 139. doi:10.4172/2375-4516.1000139.
Hauner H.A. and Peiris P.K. (2005). Banking Sector Reforms in Uganda. Journal of Political Economy, 6, 140
Jaouadi, S. and Zorgui, I. (2014). Exploring Effectiveness and Efficiency of Banks in Switzerland. International Journal of Academic Research in Business and Social Sciences, 4(4), 313-325.
Kamarudin, N. (2014). Assessing efficiency and effectiveness of Malaysian Islamic Banks: A two stage DEA analysis. AIP Conference Proceeding, 1602 (1). Retrieved from
http://aip.scitation.org/doi/abs/10.1063/1.4882595 on 12 March 2017.
Koutsoyiannis A. (1985). Mordern microeconomics. London and Basingstoke: Macmillan
Lemo T. (2005). ‘Regulatory Oversight and Stakeholder Protection’. A paper presented at the BGL Mergers and Acquisition Interactive Seminar, June 24.
National Planning Commission, Nigeria (2004); National Economic Empowerment and Development Strategy (NEEDS); Abuja, CBN Press. Nigerian Stock Exchange (2009). Factbook, Lagos: NSE
Raphael, G. (2013). Measuring Efficiency, Effectiveness and Performance of Tanzania Commercial Banks: A stage analysis. European Journal of Business and Management, 5(7), 196-206.
Williams, H. T., Ogege, S. and Ideji, J. O. (2014). An Empirical Analysis of Effective Customer Service on Nigeria Banks Profitability (A Queuing and Regression Approach). Asian Economic and Financial Review, 4(7), 864-876.
