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The Sources of Efficiency in the Nigerian Banking Industry

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  • Frances Susan Obafemi
  • Olumide Ayodele
  • Friday Ebong

Abstract

The paper employed a two-stage Data Envelopment Analysis (DEA) approach to examine the sources of technical efficiency in the Nigerian banking sub-sector. Using a cross section of commercial and merchant banks, the study showed that the Nigerian banking industry was not efficient both in the pre-and-post-liberalization era. The study further revealed that market share was the strongest determinant of technical efficiency in the Nigerian banking Industry. Thus, appropriate macroeconomic policy, institutional development and structural reforms must accompany financial liberalization to create the stable environment required for it to succeed. Hence, the present bank consolidation and reforms by the Central Bank of Nigeria, which started with Soludo and continued with Sanusi, are considered necessary, especially in the areas of e banking and reorganizing the management of banks.

Suggested Citation

  • Frances Susan Obafemi & Olumide Ayodele & Friday Ebong, 2013. "The Sources of Efficiency in the Nigerian Banking Industry," International Journal of Finance & Banking Studies, Center for the Strategic Studies in Business and Finance, vol. 2(4), pages 78-91, October.
    • Handle: RePEc:rbs:ijfbss:v:2:y:2013:i:4:id:417
    DOI: 10.20525/ijfbs.v2i4.164
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    References listed on IDEAS

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    5. Osman Zaim, 1995. "The Effect of Financial Liberalizationon the Efficiency of Turkish Commercial Banks," Working Papers 9505, Department of Economics, Bilkent University.
    6. Ms. Enrica Detragiache & Asli Demirgüç-Kunt, 1998. "Financial Liberalization and Financial Fragility," IMF Working Papers 1998/083, International Monetary Fund.
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