The Impact of Competition and Market Structure on The Financial Performance and Integrity of The Nigerian Commercial Banks

Abstract

This research examines the effects of banking competition and market structure on the financial health and integrity of the Nigerian commercial banks from 2010 to 2020. The measures of concentration k-bank concentration ratio (CRk) and Herfindahl-Hirschman Index (HHI), respectively, are used in this study to analyses competition and market structure. This research employs a panel static model that combines panel ordinary least squares, a fixed effect model, a random effect model, and a dynamic GMM model to evaluate the empirical model. The results show that the Nigerian banking market is moderately concentrated as measured by the Concentration Ratio-CR5 and the Herfindahl-Hirschman indexes-HHI, with significant disparities in market power among market competitors. The Nigerian commercial banks operate in a monopolistically competitive environment (monopolistic competition), based on conventional qualities that exist between various market structures. The findings also revealed a strong inverse relationship between Nigerian commercial banks' profitability and banking competition. To protect competition between commercial banks in Nigeria there is the need for the regulatory authorities to be cautious of efforts that may increase market concentration of commercial banks in Nigeria.