COMPETITIVE STRATEGIES AND CHANGES IN BANKING INDUSTRY IN NIGERIA
Need help with a related project topic or New topic? Send Us Your Topic
DOWNLOAD THE COMPLETE PROJECT MATERIAL
COMPETITIVE STRATEGIES AND CHANGES IN BANKING INDUSTRY IN NIGERIA
INTRODUCTION TO CHAPTER ONE OF COMPETITIVE STRATEGIES AND CHANGES IN THE BANKING INDUSTRY IN NIGERIA
1.1 BACKGROUND OF THE STUDY
The name Bank is derived from the Italian word banco, which means “desk/bench” and was used by Florentine bankers during the Renaissance to execute this transaction over a desk covered by a green tablecloth. However, there are evidence of banking activity dating back to antiquity.
Indeed, the term dates back to the old Roman Empire, when money lenders would set up shop in the middle of enclosed courtyards called Macella on a long bench called Bancu, from which the words Banco and bank are derived.
As a money changer, the merchant at the Bancu did not invest money, but rather converted it into the only legal cash in Rome, that of the imperial mint.
In 1995, McKenna and Fleming defined competition as a market state that exists when there are a big number of business enterprises, all of which are capable of supplying the same or similar items or services to a significant number of purchasers/buyers.
With the licencing and establishment of more banks bringing the total number of commercial and merchant banks in the country to approximately eight-seven, there has been a high tendency for various banks in the industry to fend for themselves for survival in the last decade.
A commercial bank is described as an establishment that accepts deposits from customers and makes loans, advances, and general financial transactions in all forms of trade. Retail, wholesale, import, and export trade are examples of such trade.
The Federal Republic of Nigeria 1991 banking decree defines a commercial bank as any entity that conducts banking activity in Nigeria, which includes commercial banks, discount houses, financial institutions, and acceptance houses.
Competition has had an impact on the banking industry in Nigeria, both favourably and badly. Many methods have been adopted by banks in an attempt to increase business efficiency and maximise profit.
This concept prompted Nigerian banks to adopt a scientific approach and conduct research into better approaches to attain company goals and objectives.
Some suggested methods include expanding existing operational facilities to a larger market area, improving corporate efficiency, diversifying portfolio and investment banking, appropriate marketing, combined branch and a small degree of unitary banking, good publicity, hiring and developing capable staff, and conducting research for future positive development and growth.
Furthermore, the industry’s competitiveness is being heightened by the rise of new brands in banks; many older banks have been forced to adapt their operations as a result of the competition.
It’s fascinating to see older institutions pay as much as 14-19% on the same deposit. The banking industry was extensively controlled before to 1986 deregulation.
Economic regulation, in general, encompasses controls that the government imposes on economic and business activities. In order to foster competition and improve economic efficiency, the government can be said to be participating in some non-traditional public sector activities.
When regulation fails, as it frequently does, the process of deregulation must inevitably begin in order to prevent the entire system from collapsing. Economic deregulation is defined as the intentional and systematic dismantling of regulatory constraints, institutions, and operational guidelines in the economy’s administration and pricing system.
The overarching idea of an economy’s or component segment’s deregulation is the belief that factors of production, goods, and services are optimally priced and allocated when their prices are freely set in a competitive context. The study’s goal is to identify competitive tactics and trends in the Nigerian banking market.
1.2 THE OBJECTIVE OF THE STUDY
The importance of banks in any country’s economy cannot be overstated. They are the foundations, the linchpins, of a country’s economy.
Financial deregulation in Nigeria began in 1987, and the resulting financial innovation has resulted in an unparalleled level of competition in the banking industry. Initially, deregulation provided strong incentives for the expansion of both the size and number of banking and non-banking entities.
As a result of the extraordinary expansion in the number of banking and non-banking institutions providing financial services, competition among various banking institutions and banking and non-banking financial intermediaries has increased.
Aside from fierce competition in a variety of financial activities, banks have also faced issues related to a persistent slowdown in economic activity, severe political instability, virulent inflation, worsening economic financial condition of their corporate borrowers, and an increase in the incidence of fraud and embezzlement of funds.
All of these variables, including deregulation, competition, innovation, economic slump, political instability, growing inflation, and frequent monetary policy reversals, have combined to produce a difficult and risky financial environment for banks.
As a result of the new financial climate, traditional banking activities’ profitability has been quickly eroding. As a result, in order to survive and sustain acceptable profit levels in this highly competitive climate,
banks have taken excessive risks. However, the growing proclivity for increased risk-taking has resulted in the insolvency and failure of a large number of banks.
As a result, the study’s main goal is to establish if competition has a favourable or detrimental impact on the banking industry.
1.3 STATEMENT OF THE RESEARCH PROBLEM
This study attempts to solve the following research questions.
i. Can we identify the strategies that influence competition in the banking industry?
ii. Can we determine how the environment influences competition in the banking industry?
iii. Can we link the number of banks to each of the financial strategies, such as deposits, total assets, loans, and advances?
iv. Can we determine how customer service affects banking industry competition?
1.4 OBJECTIVES OF THE STUDY
The primary goal of the research is to identify competitive tactics and changes in the Nigerian banking business.
The following are the secondary goals:
i. To identify the many methods that influence competition in Nigeria’s banking industries.
ii. To ascertain how financial strategies effect competition in the Nigerian banking market.
iii. To ascertain how the environment influences competition in the banking industry.
iii. To assess how customer service affects competition in the banking business.
v. To identify the qualities relevant to the banking business in a market with perfect or imperfect competition.
1.5 SIGNIFICANCE OF THE STUDY
This research is noteworthy for the following reasons:
i. In the new millennium, it will create information on the environment, customer service, financial, and marketing strategies that would enable Nigerian banks to compete effectively.
ii. It will provide information on various competitive strategies that will be beneficial to economic policymakers. Manager of a bank and a financial institution.
It will be valuable to researchers and students of business management, banking, and finance.
iv. It will be beneficial to the entire population.
1.6 RESEARCH HYPOTHESES
Spiegel (1992) noticed that it is useful to make assumptions or predictions about the populations involved in order to reach judgements. Such assumptions, which may or may not be accurate, are known as statistical hypotheses, and they are statements regarding the probability distribution of populations in general. Four hypotheses will be investigated in this study: the proportion of respondents who agreed that:
i. There are financial tactics that have an impact on bank competition.
ii. There is no restriction on enterprises entering or exiting the banking industry.
iii. A better bank is one that can provide a little extra service above and beyond what the competition provides.
iv. Some artificial interferences with the actions of banks and their customers exist.
Need help with a related project topic or New topic? Send Us Your Topic