The Structure of the Nigerian Banking Sector and its Impact on Bank Performance

Abstract

This paper attempts to measure the market structure and competition in the consolidated Nigerian banking industry, as well as investigated the impact of the banking sector structure on bank performance. A time-series regression analysis was applied to a ten-year data period (2001-2010) to evaluate the relationship and the impact of banking sector structure, other explanatory variables on bank performance. Significant findings include that the Nigerian banking sector is oligopolistic in structure and that market concentration positively and significantly impacts on bank performance. These results suggest that market concentration is a major determinant of bank profitability in Nigeria. The structure of the Nigerian banking sector and thus the performance of banks may be improved if the sector is allowed to exploit the synergistic effect of market-induced consolidation.

Keywords: Concentration; banking sector structure; relationship; performance.