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Consolidation Within The Banking Sector And Savings Deposits: Effects On Liquidity, Output, And Profitability Within The Nigerian Economy

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  • OGHENOVO ADEWALE OBRIMAH

    (Babcock University, Ilishan Remo Ogun State Nigeria, ILISHAN REMO, Nigeria)

  • CHIDINMA EDITH EBERE

    (Babcock University, Ilishan Remo Ogun State Nigeria, ILISHAN REMO, Nigeria)

Abstract

In this study, we find savings deposits have contributed significantly to the effectiveness of regulation induced consolidation within the banking sector in so far as improvements in banking system structure, output, profitability and competitiveness are concerned. Specifically, we find savings deposits are key parameters in the transition from a banking structure within which profitability is primarily determined by liquidity during the pre-consolidation period (2007–2008) to a banking structure within which profitability is primarily a function of loan portfolio growth (output) during the post-consolidation period (2010–2012). In spite of the increase in importance of savings deposits for banking system competition, output, or profitability during the post-consolidation period, savings deposit rates have decreased by about 50% between the pre- and post-consolidation periods. Interest rates on savings deposits also do not lie on the efficiency frontier for loan production. Combined, our findings indicate the benefits of consolidation that accrue from savings deposits have yet to translate into social welfare benefits for banks' retail customers.

Suggested Citation

  • Oghenovo Adewale Obrimah & Chidinma Edith Ebere, 2015. "Consolidation Within The Banking Sector And Savings Deposits: Effects On Liquidity, Output, And Profitability Within The Nigerian Economy," Annals of Financial Economics (AFE), World Scientific Publishing Co. Pte. Ltd., vol. 10(01), pages 1-29.
    • Handle: RePEc:wsi:afexxx:v:10:y:2015:i:01:n:s2010495215500013
    DOI: 10.1142/S2010495215500013
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    References listed on IDEAS

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    1. Mr. Martin Cihak & Simon Wolfe & Mr. Klaus Schaeck, 2006. "Are More Competitive Banking Systems More Stable?," IMF Working Papers 2006/143, International Monetary Fund.
    2. John H. Boyd & Mr. Gianni De Nicolo & Abu M. Jalal, 2009. "Bank Competition, Risk, and Asset Allocations," IMF Working Papers 2009/143, International Monetary Fund.
    3. John Hawkins & Dubravko Mihaljek, 2001. "The banking industry in the emerging market economies: competition, consolidation and systemic stability: an overview," BIS Papers chapters, in: Bank for International Settlements (ed.), The banking industry in the emerging market economies: competition, consolidation and systemic stability, volume 4, pages 1-44, Bank for International Settlements.
    4. Bank for International Settlements, 2001. "The banking industry in the emerging market economies: competition, consolidation and systemic stability," BIS Papers, Bank for International Settlements, number 04.
    5. Ezema Charles Chibundu, 2013. "Private Sector Incentives and Bank Risk Taking: A Test of Market Discipline Hypothesis in Deposit Money Banks in Nigeria," Working Papers 263, African Economic Research Consortium, Research Department.
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    Cited by:

    1. Le Ngoc Thuy Trang & Do Thi Thanh Nhan & Nguyen Thi Nhu Hao & Wing-Keung Wong, 2021. "Does Bank Liquidity Risk Lead To Bank'S Operational Efficiency? A Study In Vietnam," Advances in Decision Sciences, Asia University, Taiwan, vol. 25(4), pages 46-88, December.

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    More about this item

    Keywords

    Consolidation; mergers; acquisitions; regulation; savings; deposits; loans; competition; banks; structure; G1; G2;
    All these keywords.

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • G2 - Financial Economics - - Financial Institutions and Services

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