Commercial bank performance in a developing country : a case study of Nigeria

Doctoral thesis English OPEN
Adekanye, F.A.Z.
  • Subject: HG

Inspite of the fact that banking has been practised in Nigeria for about a hundred years, little is still known about the characteristics of Nigerian banks as well as what factors determine their performance, that are essentially typical of banks operating in developing economies, particularly those of Africa. This study represents a research effort aimed at contributing to the literature on the determinants of commercial bank performance in general, and in developing economies in articular. The study employs univariate tests in addition to both the discriminant and logit techniques of analyses to determine which factor(s) are major determinants of commercial bank performance, using Nigeria as a case study and over the period of Structural Adjustment Programme (SAP) (1987-1989) as well as the last two years prior to this period (1985-1986). We are, thus, able not only to identify these bank performance factors for each year during the five year period (1985-1989), but also to observe the trend over both periods and consequently compare developments pre- and since SAP. It also attempts to identify factors that distinguish Nigerian commercial banks by type of ownership, head-office location as well as banks with technical partners from those without. We establish that managerial efficiency remains the most important determinant of commercial bank performance over both the pre-SAP and SAP periods. Over the entire study period vulnerable banks were shown to be significantly less efficient compared with the resistant banks. With respect to the SAP period we find that such factors as capital adequacy and liquidity have begun to be significant performance factors only since the more recent years of the SAP period. The conclusions from the techniques of analyses were also corroborated by our critical examination of the National Bank of Nigeria, which is perhaps the most financially vulnerable of the operating banks in Nigeria to date. Through this, we establish the critical nature of the composition and actions of a bank's board for its performance. The incessant clashes between the management and boards of Nigerian banks is also established as a significant hinderance to sound bank performance. This has also caught up with the new banks, thereby threatening industy's survival.
  • References (7)

    2.1 Commercial Banks that Failed in Nigeria 11 2.2 Distribution of Commercial Banks' Loans and Advances 16 2.3 Growth of Nigerian Commercial Banks: 1960 - 1992 18 2.4 Commercial Banks Operating in Nigeria and Number of Branches as at December 31, 1989 20 2.5 Rural Banking Programme: Allocation of Branches and Compliance by Commercial Banks as at 31st December 1991 23 2.6 Deposit Liabilities of Nigerian Commercial Banks 24 2.7 Growth of Commercial Banks' Principal Assets 26 2.8 Commercial Banks' Total Assets: Share of the Big Three Banks 28 2.9 Commercial Banks' Total Deposit: Share of the Big Three Banks 29 2.10 Commercial Banks' Total Loans and Advances: Share of the Big Three Banks 31 5.1 List of Respondent Banks 5.2 Quality of Questionnaires of Respondent Banks 5.3 Ownership, Management, Branch Network and Staff Size of Respondent Banks

    5.4 Distribution of Respondent Banks by Bank Ownership, Management and Head-Office Location 5.5 Ranking of Bank Performance Factors by Importance 5.6 Priority Ranking of Groups of Indicators as Determinants of Bank Performance

    5.7 Comparison of Rankings of Bank Performance Factors 5.8 Survey Responses on Factors Positively Correlated with Bank Performance

    5.9 Survey Responses on Factors Negatively Correlated with Bank Performance

    5.10 Perceived Correlation of Factors with Bank Performance 5.11 Survey Responses on the Most Important Bank Performance Factors

    5.12 Survey Responses on Prevention of Bank Failure by CBN 6.7 Mean and Median Return on Assets for Vulnerable and Resistant Banks by Different Performance and Other Classifications

    Wood, J. (1970) "Two Notes on the Uniqueness of Commercial Banks", Journal of Finance, pp. 99-109.

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