Abstract: Banking is not really a competitive industry. In reality, it's more like an oligopoly -- a scenario in which an industry is controlled by a small number of firms. A competitive and efficient banking system is critical to the success of any economy. Apart from providing credit, it serves as a channel for managing system liquidity, and ensures compliance with regulatory guidelines. In Nigeria, monetary policy transmission has been distorted by activities of deposit money banks (DMBs), leading to high lending rates and costs of banking services. This study reviewed articles that utilises panel data analysis for monthly data from 2007 to 2014, for twenty banks. Reduced form interest revenue function was estimated and the H-Statistics were computed using the elasticity’s of input prices. Measures of market power, namely market share, concentration ratios (CR) for the 3, 4 and 5 largest banks (CR3, CR4 and CR5) and Herfindal-Hirschman Index (HHI) are regressed on bank’s profitability indicators. It was found that CR3, CR5 and HHI were positive and significant, indicating concentration and market power enhance banks profitability, further confirming the presence of oligopoly in the Nigerian banking industry. Therefore, policies on competition regulations should be formulated and enforced.
Keywords: Oligopoly, Market Structure, Banking Industry, Panel Data, Nigeria.
Title: COLLUSIVE OLIGOPOLY IN THE NIGERIAN BANKING SECTOR
Author: Idisi P.O., Ogwu I. J., Adamu S. M
International Journal of Management and Commerce Innovations
ISSN 2348-7585 (Online)
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