Abstract
This study investigates the causal relationship between bank personnel ratio and the cost-income ratio based on performance in Nigeria for the period of 2004–2015. Secondary data collected on a cross section of 15 banks during this period was analyzed using panel unit root, cointegration and Granger causality techniques. A unit root test revealed that the variables are stationary at order one. The result further shows there is an equilibrium relationship or stability in the short and long run; furthermore, there is a bidirectional causal relationship between personnel ratio and cost-income ratio. Therefore, the study recommends that the apex bank should enforce policies in the banking sector that will minimize the unit cost of operation – even though they might hire more staff. This is to enhance the stability of the banks in Nigeria and to avoid any threat to their continuity.
Highlights
The state of Nigerian banking sector and its effect on stakeholders have led to increased public concern and scrutiny of its operations and performance
The result ratio and the debt to total equity ratio which cap- discovered that there is a unidirectional causality tured the capital adequacy, will affect the efficien- of error between cost-income ratio (CIR) and personnel ratio, meancy of banking performance measured by CIR in ing that CIR of banks can cause the personnel exthe long run
It was found that personnel ratio and debt to total equity, which is a measure of capital adequacy, Granger causes CIR of Nigerian banks and vice versa
Summary
The state of Nigerian banking sector and its effect on stakeholders have led to increased public concern and scrutiny of its operations and performance. Traditional cost-income ratio (CIR) is a widely known measure of bank performance. According to Hussain (2014), the profitability of banks is commonly influenced by two factors: the service production capability and the market conditions in terms of competition and price levels It is commonly believed in the financial industry that a high CIR is equivalent to low efficiency and productivity, and vice versa. A few years later, they become distressed and have to restructure their human and capital resources by laying off staff and closing some branches These are immediate measures for resolving the challenges, while other measures like loan screening, monitoring and repayment, managerial re-structuring, proper handling of insider dealings that have greater influence on CIR, all come up later. The last section concludes the study, provides necessary recommendations based on the findings and makes suggestions for further research
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