The main objective of this study is to determine the factors that
affects competition in commercial banks. competition as a market
situation which holds where there are a large number of business firms
that are capable of supplying the same or similar services (McKenna and
A subsidiary objective for this study was on the effect of
environmental factor on competition in commercial banks, the effect of
financial factor on competition in commercial banks, and the effect of
customer service on competition in commercial banks. Based on this
subsidiary objectives, a questionnaire was developed and a total of 60
respondents were administered the questionnaires. 58 respondents of a
total of 60 agreed that environmental factor affects competition in
commercial banks, 59 respondents of the total respondents was of the
opinion that financial factor affects competition in commercial banks
and 60 respondents of the total agreed with customer service as a factor
that affects competition in commercial banks with percentages of total
respondents of 96.7%, 98.3% and 100% respectively for Yes.
However, it was observed that these factors that affects competition
in commercial banks are independent of each other, based on the findings
from respondents and data collection. Using 5% level of significance.
TABLE OF CONTENTS
Table of Contents
List of Figures
List of Tables
CHAPTER ONE: INTRODUCTION
1.1 Background of the Study
1.2 The Purpose of the Study
1.3 Statement of Research Problem
1.4 The Objectives of the Study
1.5 Significance of the Study
1.6 Research Hypotheses
1.7 Limitation of the Study
1.8 Structure of Work
CHAPTER TWO: LITERATURE REVIEW
2.1 An Overview of Commercial Banking
Industry in Nigeria
2.2 Factors Affecting Competition in Commercial Banks
2.3 Financial Factors Affecting Competition in
Commercial Bank (Assets and Liabilities, Loan
2.4 Customer Service
2.5 Market Structure and Competition
2.6 Competitive Marketing Strategy
CHAPTER THREE: THEORETICAL FRAMEWORK AND RESEARCH METHOD AND PROCEDURE
3.1 The Bank Credit Theories
3.2 Research Designs
3.4 Sample Size/Sampling Method
3.5 Type of Data
3.6 Methods of Data Collection
3.7 Data Analysis Tools
3.8 Description of Data Analysis Tools
CHAPTER FOUR: DATA PRESENTATION AND STATISTICAL ANALYSIS
4.2 Data Presentation/Analysis
4.3 The Percentage Analysis of the Responses to Yes or No
4.4 Cross-Tabulated Analysis
4.5 Hypothesis Testing
CHAPTER FIVE: SUMMARY OF FINDINGS, CONCLUSION AND RECOMMENDATIONS
5.2 Summary of Findings
5.3 Discussion of Findings
LIST OF FIGURES
Figure No. Title
1.1 The Simple Bar-Chart of the Data of the Sex of the 60 respondents
1.2 The Simple Bar Chart of the Data on the Marital Statuses of the 60 Respondents
1.3 The Histogram of the Data on the Ages of The 60 Respondents
1.4 The Pie-Chart of the Data on the Highest Education Qualification of the 60 Respondents
LIST OF TABLES
Table No. Title
1. The Summary of the Personal Data of
2. The Table of Marital Status of Respondents
3. The Histogram of the Data on the Ages of
4. The Percentage Analysis of the Responses to
The Yes or No
5. The Analysis of the Statuses of the Respondents
6. The Computational Details of the Four Hypotheses
1.9 BACKGROUND OF THE STUDY
The name Bank is derived from the Italian word banco “desk/bench”
used during the Renaissance by Florentine bankers, who used to make this
transaction above a desk covered by a green tablecloth. However there
are traces of banking activity even in ancient time.
In fact, the word traces its origins back to the ancient Roman
Empire, where money lenders would set up their stalls in the middle of
enclosed courtyards called Macella on a long bench called Bancu, from
which the word Banco and bank are derived.
As a money changer, the merchant at the Bancu did not so much invest
money as merely convert the foreign currency into the only legal tender
in Rome that of the imperial mint. .
McKenna and Fleming in 1995 described competition as a market
condition which exist when there are large number of business
enterprise, all able to supply the same or similar products or service
to a large number of purchase/buyers.
In this last decade there has been a high competition within the
banking industry in Nigeria, with the licensing and establishment of
more banks bringing the total number of commercial and merchant bank in
the country to about eight-seven, there has been high tendency for
various banks in the industry to fend for themselves for survival.
A commercial bank is defined as an establishment which accepts
deposit from customers that are prepared where loans and advances and
general financial business concerning all forms of trade are made.
Example of such trade are retail, wholesale, import and export trade.
The 1991 banking decree defines a commercial bank as any institution
which carries out banking business in Nigeria which includes a
commercial banks, a discount house, financial institution and an
acceptance house (Federal Republic of Nigeria 1991).
The commercial banking industry in Nigeria has been positively and
negatively affected by competition. In attempt by commercial banks to
fend for themselves, many method have being adopted to improve corporate
efficiency and maximize profit. This method led the Nigeria banking
into scientific approach and investigation into better ways to achieve
corporate goals and objective. Some suggested method include expansion
of existing operational facilities to area of wider market, improving
corporate efficiency, diversification of port folio and investment
banking, appropriate marketing, application of combined branch and a
little degree of unitary banking, good publicity, employment and
development of capable staff and carrying out research for onward
positive development and growth.
Also, each day competition in the industry is heightened by emergence
of new brand in commercial banks, many of the older commercial banks
have bring forced to change in their operation due to the competition.
It is interesting to watch older commercial banks paying as much as
14-19% same deposit. Before the 1986 deregulation in the commercial
banking industry has been highly regulated.
Economic regulation in general, embraces controls, which government
imposes on economic and business activities reaching the maximum
regulation, the government can be said to be participating in some
non-traditional public sectors activities in order to foster competition
and improve economic efficiency. When regulation fails, as it often
does the process of deregulation inevitable begins in a bid to avoid a
collapse of the whole system. Economic deregulation is defined as
deliberate and systematic removal of regulatory controls, structures and
operational guideline in the administration and pricing system in the
The underline philosophy of the deregulation of an economy or its
component segment is the belief that factors of production, goods and
services are optimally priced and allocated when their prices are freely
determined in a competitive environment. The aim of the study is to
determine four factors affecting competition in the commercial banking
industry in Nigeria.
1.10 THE PURPOSE OF THE STUDY
The relevance of commercial banks in the economy of any nation cannot
be over emphasized. They are the cornerstones, the linchpin of the
economy of a country.
The financial deregulation in Nigeria started in 1987 and the
associated financial innovation have generated an unprecedented degree
of competition in the banking industry. The deregulation initially
pivoted powerful incentives for the expansion of both size and number of
banking and non-banking institutions.
The consequent phenomenal increase in the number of banking and
non-banking institutions provide financial services which led to
increased in competition amongst various banking institution and banking
and non-banking financial intermediaries.
Apart from the keen competition with the range of financial
activities commercial banks have also faced problem associated with a
persistence slow down in economic activities, severe political
instability, virulent inflation, worsening economic financial condition
of their corporate borrowers and increase incidence of fraud and
embezzlement of funds. All these factors of deregulation, competition,
innovation economic recession political instability, escalating
inflation and frequent reversal in monetary policy have combined to
create a challenging and precautious financial environment for banks.
Consequence of new financial environment has been rapidly declining
profitability of the traditional banking activities. Thus, in a bid to
survive and maintain adequate profit level in this highly competitive
environment banks have tended to take excessive risk. But, then the
increasing tendency for greater risk taking has resulted to insolvency
and failure of a large number of banks.
Hence the sole aim of the study is to determine how some of these
factors affect commercial banking industry either positively or
1.11 STATEMENT OF RESEARCH PROBLEM
This research work is an attempt to answer the following research questions
i. Can we determine the financial factors that affects competition in the commercial banking industry?
ii. Can we determine how environment affects competition in the banking industry?
iii. Can we correlate the number of commercial banks and each
of the financial factors namely deposits, total assets, loans and
iv. Can we determine how customers service affect competition in the banking industry?
1.12 THE OBJECTIVES OF THE STUDY
The main objective of the study is to determine the factors that affect competition in commercial banking industry.
The subsidiary objectives include:
i. To determine the various factors that affects competition in commercial bank.
ii. To determine how financial factors affect competition in commercial banking industry.
iii. To determine how the environment affect competition in commercial banking industry.
iv. To determine how customers services affect competition in commercial bank.
v. To determine the characteristics relevant to the banking industry in a perfectly/imperfectly competition market
1.13 SIGNIFICANCE OF THE STUDY
This study is significant because of the following reasons:
i. It will generate information in the new millennium on
environment, customer service, financial and marketing factors that will
make commercial banks in Nigeria to cope well with the competition.
ii. It will provide information on the various factors of
competition as it would be useful to economic policy makers. Banks
manager and financial institution.
iii. It will be useful to the researcher, student in business management, banking and finances.
iv. It will be useful to the public in general.
1.14 RESEARCH HYPOTHESES
Spiegel (1992) observed that in an attempt to reach decisions, it is
useful to make assumption or guesses about the populations involved.
Such assumptions which may or may not be true are called statistical
hypothesis and in general are statements about the probability
distribution of the populations. In this research work four hypotheses
will be tested that the proportion of the respondents who agreed that:
i. There are financial factors that affect the competition of the banks.
ii. There is freedom of entry and exit of firms in the banking industry.
iii. The better bank is the one that is capable of offering
that little extra service over and above what other competition offer.
iv. There are some artificial interference’s with the activities of the commercial banks and their customers.
1.7 LIMITATION OF THE STUDY
The use of secondary data has the limitations that the data may be
obsolete or its unit of analysis may be different from the one used in
the study. Also because the researcher is not the original collector of
the data any mistakes or colouring or brake may not be discovered by the
The Cross-sectional survey has the limitation that it is “one shot”
or almost “two shot” and as a result its capacity for collecting data
with which to test the causal relationship of variables is minimized
unlike what is the situation when the panel research design is used.
Also there is a limitation of an increased unwillingness of the
respondents to respond to survey problems.
The questionnaire is limited to the use of verbalished answers to
pre-determined question. In the fixed answer format, if a particular
answer is missing, this may lead to errors, if a respondent gives his
or her answers in a baffling manner there is usually not much that can
be done to redress the situation.
The structured and standardized format of the questionnaire may
compel the respondents to give answer that they do not fully endorse. A
certain level of education is needed for a respondent to fully
understand the questions. There is the limitation that the researcher is
not a policeman or woman and cannot force the respondents to give
The rigidity of the research instrument may limit the amount of
information that can be got. There is also a problem of memory or beyond
it when people are expected to remember past facts. There is also the
problem that the respondent may need to be motivated to enable them
contribute willingly to the completion of the questionnaire. The
assumption that there is uniformity from one interviewing situation
another may not hold especially in a situation where there are more than
one interviewers. There is also the limitation of high cost in the
administration of the research instrument especially due to high
personnel and travel cost. There are also the limitations of the
scarcity of time and money resources.
1.15 STRUCTURE OF WORK
This research work is to be structured in five chapters as follows:
2. An overview of commercial banking industry in Nigeria
3. Research methodology
4. Data presentation and Analysis of data
5. Summary of finding, conclusion and recommendations.