Volume 9, Issue 4, August 2020, Page: 176-182
The Level of Competition Among the Deposit Money Banks (DMBs) in Nigeria
Bosede Olanike Awoyemi, Department of Economics, Afe Babalola University of Ado-Ekiti, Ado-Ekiti, Nigeria; Macroeconomics and Governance Division, United Nations Economic Commission for Africa (UNECA), Addis Ababa, Ethiopia
Josephine Onyinyechi Ihesiaba, Department of Economics, Afe Babalola University of Ado-Ekiti, Ado-Ekiti, Nigeria
Received: Apr. 14, 2020;       Accepted: May 3, 2020;       Published: Jun. 17, 2020
DOI: 10.11648/j.ijber.20200904.13      View  33      Downloads  22
Abstract
The level of competition in view of the financial performance of Deposit Money Banks (DMBs) between the periods of 2009 to 2018 was investigated. To measure competition, a four-firm Concentration ratio (CR4) and Herfindal-Hirschman Index (HHI) were used. To denote the percentage of market share that the individual bank has relative to the market size, the HHI and CR4 were computed from the individual bank’s return on assets relative to the total assets of all the Deposit Money Banks in Nigeria. Simple arithmetic from excel workbook was done to estimate the competition indices (HHI and CR4). Data were obtained from the annual financial statement of the selected 15 deposit money banks in Nigeria. Descriptive statistics were used to show the trends of the top four (4) Concentration ratio (CR4) and Herfindal-Hirschman Index (HHI). It was also used to identify the characteristics of the Herfindal Hirschman Index (HHI) and Concentration Ratio CR of the Deposit Money Banks (DMBs). The descriptive statistics provide the summary statistics such as average value (mean), minimum and maximum values, median and standard deviation. The results indicated a high level of competition among the deposit money banks, and the banking industry was found to be highly competitive between the period of year 2009 and 2018.
Keywords
Competition, Herfindal-Hirschman Index (HHI), Market, Concentration Ratio (CR), Nigeria, Return on Asset (ROA), Banking Industry, Performance, Banks, Market Share
To cite this article
Bosede Olanike Awoyemi, Josephine Onyinyechi Ihesiaba, The Level of Competition Among the Deposit Money Banks (DMBs) in Nigeria, International Journal of Business and Economics Research. Vol. 9, No. 4, 2020, pp. 176-182. doi: 10.11648/j.ijber.20200904.13
Copyright
Copyright © 2020 Authors retain the copyright of this article.
This article is an open access article distributed under the Creative Commons Attribution License (http://creativecommons.org/licenses/by/4.0/) which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.
Reference
[1]
Aghion, P., Carlin, W., & Schaffer, M. E. (2002). Competition, innovation and growth in transition: Exploring the interactions between policies.
[2]
Allen, F., Carletti, E., & Gu, X. (2008). The roles of banks in financial systems. Prepared for the Oxford Handbook of Banking edited by Allen Berger, Phil Molyneux, and John Wilson.
[3]
Adegboye, F. B., Olowe, O., & Uwuigbe, O. R. (2013). Returns on investment of deposit money banks (DMBs) in Nigeria. Journal of Applied Finance & Banking, 3 (3), 195-206.
[4]
Olokoyo, F. O., Taiwo, J. N., & Akinjare, V. A. (2016). The Impact of Banks' Activities on Economic Development in Nigeria. International Business Management, 10 (22), 5341-5351.
[5]
Abdulateef, Y., Ekundayo, O., & Mizita, O. Q. (2019). Determinants of Survival of Listed Deposit Money Banks in Nigeria. European Journal of Accounting, Auditing and Finance Research. 7 (3); 20-40.
[6]
Mordi, C. N. (2010). The link between the financial (banking) sector and the real sector of the Nigerian economy.
[7]
Schumpeter, J. (1934). The theory of economic development Harvard University Press. Cambridge, MA.
[8]
Bikker, J. A. and Haaf, K. (2002) ‘Measures of competition and concentration in the banking industry: a review of the literature’, Economic and Financial Modelling, (9).53–98.
[9]
Enendu, C. I.; Abba, M. A.; Fagge, A. I.; Nakorji, M.; Kure, E. U.; Bewaji, P. N.; Nwosu, C. P.; Ben-Obi, O. A.; Adigun, M. A.; Elisha, J. D.; Okoro, A. E and Ukeje N. H (2013). Bank Intermediation in Nigeria: Growth, Competition and Performance of the Banking Industry, 1990 – 2010. Occasional Paper no 48, Central Bank of Nigeria. Abuja, Nigeria.
[10]
Berger, A. N., Demirguc-Kunt, A., Levine, R. and Haubrich, J. G. (2004) ‘Bank concentration and competition: an evolution in the making’, Journal of Money, Credit and Banking, 36 (3); 433–451.
[11]
Calem, P. S. and Carlino, G. A. (1991) ‘The concentration/conduct relationship in bank deposit markets’, The Review of Economics and Statistics. 73 (2); 268–276.
[12]
Casu, B., Ferrari, A. and Zhao, T. (2010) ‘Financial reforms, competition, and risk in banking markets’, in Fiordelisi, F., Molyneux, P. and Previati, D. (Eds): New Issues in Financial and Credit Markets, Palgrave Macmillan, Basingstoke. 111–120.
[13]
Gwin, C. R. (2001). A Guide for Industry Study and the Analysis of Firms and Competitive Strategy. Babson College Horn Library at http://www.babson.edu/library/. Accessed online, (2015).
[14]
The DOJ and the Federal Trade Commission Horizontal Merger Guidelines. Available at http://www.usdoj.gov/atr or http://www.ftc.gov/
[15]
Athanasoglou, P. P., Brissimis, S. N., & Delis, M. D. (2008). Bank-specific, industry-specific and macroeconomic determinants of bank profitability. Journal of international financial Markets, Institutions and Money, 18 (2), 121-136.
[16]
Casu, B., Girardone, C., & Molyneux, P. (2012). Is there a conflict between competition and financial stability?. Research Handbook on International Banking and Governance, part, 1.
[17]
Mugume, A. (2010). Competition and Performance in Uganda's Banking System. AERC Research paper 203. Nairobi. Retrieved online at https://www.africaportal.org/publications/competition-and-performance-in-ugandas-banking-system/.
[18]
Ajisafe, R. A., & Akinlo, A. E. (2014). Competition and Efficiency of Commercial Banks: Empirical Evidence from Nigeria. American Journal of Economics, 4 (1), 18-22.
[19]
Bajomo, O. A. Akinlo, A. E. (2018). Consolidation, Reforms and Profitability of Deposit Money Banks: Evidence from Nigeria. Archives of Business Research, 6 (8); 376-395.
[20]
Naceur, S. B., & Omran, M. (2011). The effects of bank regulations, competition, and financial reforms on banks' performance. Emerging Markets Review, 12 (1), 1-20.
[21]
Altunbas, Y., Van Leuvensteijn, M., & Marqués-Ibáñez, D. (2014). Competition and bank risk: the effect of securitization and bank capital (No. 1678).
[22]
Obidike, P. C., Ejeh, G. C., & Ugwuegbe, S. U. (2015). The impact of interest rate spread on the performance of Nigerian Banking Industry. Journal of economics and sustainable development, 6 (12), 131-139.
[23]
Chand, S. (2003). An assessment of the proposal for a Pacific Economic and Political Community. Pacific Economic Bulletin, 18 (2), 117-124.
[24]
Uddin, S. S., & Suzuki, Y. (2014). The impact of competition on bank performance in Bangladesh: an empirical study. International Journal of Financial Services Management 2, 7 (1), 73-94.
[25]
Zhou, J. (2009). The asset location puzzle: Taxes matter. Journal of Economic Dynamics and Control, 33 (4), 955-969.
Browse journals by subject