Financial Innovation and Efficiency of Financial Intermediation in Nigeria

Abstract

This study investigated the effect of financial innovation on efficiency of financial intermediation of commercial banks in Nigerian between 2008 and 2018. The study used secondary data obtained from the Annual reports and Accounts of the Central Bank of Nigeria (CBN). The explanatory variables of the study are the product innovations in the banking sector namely: volume of automated teller machine transactions (ATM), volume of point-of-sale transactions (PoS), volume of Internet banking transactions (IBT) and volume of Mobile banking transactions (MBT). The dependent variable is the financial intermediation efficiency proxied by interest rate spread, which is measured by the difference between maximum lending rate and savings rate. A multiple regression model developed for the study was analysed with the help of Ordinary Least Square (OLS) regression technique. The result from the descriptive statistics indicated that financial intermediation in Nigeria is inefficient. The results showed that ATM, IBT and MBT have insignificant positive effects on financial intermediation while PoS has negative effects on financial intermediation efficiency. Further results indicated that the 57% change in financial intermediation efficiency explained by financial innovation is not statistically significant. The study therefore concluded that financial innovation in itself is not a determinant of the efficiency of the intermediation process in Nigeria. It is then recommended that the regulatory authority among others should make policies to increase the savings rate, so that the surplus unit will be encouraged to make their funds available to the banks for lending.

Financial technology and economic growth nexus in the East African community states

“…ATMs refer to mechanized telecommunication devices that provide financial institution clients access to public financial transactions as used by Qamruzzaman and Jianguo (2019). POSs refers to the number of POS terminals for 100,000 adult populations (Chukwunulu, 2019). Debit card owners are the number of debit cards per 1,000 adult population.…”

Determinants of Money Demand: An Empirical Examination

“…This, in turn, would result in a decline in the demand for cash. Similarly, as economic agents such as households move away from more liquid assets (cash) to demanding less liquid assets (mobile money or ATM money), they are more likely to demand less money (Chukwunulu, 2019). In contrast, new financial innovations could potentially increase the demand for money if payment systems are efficient, but individuals are likely to demand more liquid assets (Dunne & Kasekende, 2018).…”

Self-employment, Broad Money, Interest Rates Spread and Their Impact on Savings: The Case for Kenya

“…Other areas where they broad money policy would be beneficial to the national economy would be in the area of value addition. Horizontal and vertical integration, and greater compliance to tax laws and other fiscal obligations for many SME will happen if have ready access to capital, and this can only happen with better intermediation by banks, as was researched in Nigeria (Chukwunulu, 2021).The Washington consensus of the 1980s prevailed upon the developing nations to a free their financial sector the interest rates and as a result today interest-rates have not been low enough to spur growth and development especially among the SMEs. According to Meng, Sun, Zhao and Zhu, (2020) many banks in China who adopted innovation and transformation with new products and services were able to improve on efficiency and realise good results reducing the impact of narrowing spreads.…”