Banking & Finance Project Topics & Materials

DETERMINANTS OF BANK EFFICIENCY IN NIGERIA: A PANEL EVIDENCE

ABSTRACT
This study is motivated by the recent global financial crisis that lasted between 2007 and 2009 and affected the world at large but started partly due to the inefficiency of banks in the United States. There have been however several reforms in the financial sector to strengthen banks and improve reliability. The study analysis the determinants of bank efficiency from a CAMEL perspective. The data from the annual bank reports was used to run a panel model for 12 banks, employing the panel stochastic frontier model and the fixed effect panel model. The findings of the study suggest that capital, management and liquidity are significant determinants of bank earnings while asset is not a significant determinant. Also the results show that banks in Nigeria are efficient in their consumption of inputs in optimizing output. The results show that 10 of the banks are not significantly different from Access Bank in determining earnings, and only Guaranty Trust Bank was statistically significant. The study therefore recommends that the government should maintain the capital enhancement policies as well as other policies that strengthen the CAMEL parameters and improve bank efficiency.

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