Open AccessThe Sources of Efficiency in the Nigerian Banking Industry
Author(s) -
Frances Susan Obafemi,
Olumide S. Ayodele,
Friday S. Ebong
Publication year - 2013
Publication title -
international journal of finance and banking studies
Language(s) - English
Resource type - Journals
ISSN - 2147-4486
DOI - 10.20525/ijfbs.v2i4.164
Subject(s) - consolidation (business) , liberalization , data envelopment analysis , banking industry , financial system , business , industrial organization , economics , finance , market economy , mathematical optimization , mathematics
The paper employed a two-stage Data Envelopment Analysis (DEA) approach to examine the sources of technical efficiency in the Nigerian banking sub-sector. Using a cross section of commercial and merchant banks, the study showed that the Nigerian banking industry was not efficient both in the pre-and-post-liberalization era. The study further revealed that market share was the strongest determinant of technical efficiency in the Nigerian banking Industry. Thus, appropriate macroeconomic policy, institutional development and structural reforms must accompany financial liberalization to create the stable environment required for it to succeed. Hence, the present bank consolidation and reforms by the Central Bank of Nigeria, which started with Soludo and continued with Sanusi, are considered necessary, especially in the areas of e banking and reorganizing the management of banks.