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 Fleming, 1995).
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
1.1Background of the
1.2The Purpose of the
1.3Statement of Research Problem
1.4The Objectives of the Study
1.5Significance of the
1.7Limitation of the Study
1.8Structure of Work
CHAPTER TWO: LITERATURE REVIEW
2.1An Overview of Commercial Banking
Industry in Nigeria
2.2Factors Affecting Competition in Commercial Banks
2.3Financial Factors Affecting Competition in
Commercial Bank (Assets and Liabilities, Loan
2.5Market Structure and Competition
2.6Competitive Marketing Strategy
CHAPTER THREE: THEORETICAL FRAMEWORK AND
RESEARCH METHOD AND PROCEDURE
3.1The Bank Credit Theories
3.4Sample Size/Sampling Method
3.5Type of Data
3.6Methods of Data Collection
3.7Data Analysis Tools
3.8Description of Data Analysis Tools
CHAPTER FOUR: DATA PRESENTATION AND STATISTICAL
4.3The Percentage Analysis of the Responses to Yes
CHAPTER FIVE: SUMMARY OF
FINDINGS, CONCLUSION AND RECOMMENDATIONS
5.3Discussion of Findings
Appendix LIST OF FIGURES
Figure No. Title
1.1The Simple Bar-Chart of the Data of the Sex of
the 60 respondents
1.2The Simple Bar Chart of the Data on the Marital
Statuses of the 60 Respondents
1.3The Histogram of the Data on the Ages of The 60
1.4The 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
1.9BACKGROUND 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
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 economy.
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.
1.10THE 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
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
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
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 negatively
1.11STATEMENT OF RESEARCH PROBLEM
This research work is an attempt to answer the following research
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?
1.12THE 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
1.13SIGNIFICANCE 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.
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 research.
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 answers.
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.
1.15STRUCTURE OF WORK
This research work is to be structured in five chapters as follows:
2.An overview of commercial banking industry in
4.Data presentation and Analysis of data
5.Summary of finding, conclusion and
TERMS AND CONDITIONS APPLY
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