Nigerian Financial Sector Research Articles

Enterprise Risk Management Implementation and Earnings Quality: An Empirical Investigation on Nigerian Financial Sector

Researches on Enterprise Risk Management (ERM) have gained relevance in accounting and finance literature in recent years, due to more stringent regulations following the global financial crisis. Based on this recent development, this study investigates whether compliance with Enterprise Risk Management implementation impact earnings quality of fifty (50) financial firms in Nigeria. Generalised Method of Moments (GMM) estimator and difference-in-differences analysis were used to test the hypothesis of the study. We also use content analysis method to evaluate the ERM disclosure of the selected financial firms. The results shows that compliance with ERM strategy improves earnings quality and performance. In addition, the result reveals that the implementation of ERM contributes 45.6% increase to earnings quality during the post-ERM period (2019-2023) using the difference-in-differences method. This study contributes to knowledge in accounting and finance literature with respect to ERM research in under-investigated context (Sub-Saharan Africa) with a specific focus on Nigeria.

AN APPRAISAL OF THE REGULATION OF DIGITAL BANKS IN NIGERIA

The advent of the computer age saw industries across the world hopping on the Information and Communications Technology train in a bid to survive. The financial industry is no exception, having since incorporated Information and Communications Technology in its operations. Traditional financial institutions like banks now utilize technology to render financial services to their customers. Aside the traditional banks, a new class of banks called digital banks has emerged in recent times in Nigeria, examples include Kuda, Aladdin, and VBank. These banks operate without a physical banking hall and render their services digitally. Although digital banks were not originally included in Nigerian laws, these banks now have the backing of the principal legislation regulating banks in Nigeria: the Banks and Other Financial Institutions Act 2020, hence solidifying their place in the Nigerian financial sector. With the aim of evaluating the effectiveness of the extant legal framework for digital banks in Nigeria, this paper explored the evolution of banking in Nigeria, the emergence of digital banks, the pros and cons of such banks as well as the existing legal framework for digital banks in Nigeria. The research methodology adopted is the doctrinal research methodology and primary sources like statutes, guidelines and case laws as well as secondary sources like textbooks and journals were utilized. The paper found that the existing legal framework for digital banks in Nigeria is fragmented and does not sufficiently address the uniqueness of these banks. It recommended the development of a comprehensive legal framework for digital banks in Nigeria, which incorporates a licensing regime solely for digital banks.

Corporate Governance and Ethical Practice in the Nigerian Financial Sector

This study investigated corporate governance and ethical practice in the Nigerian financial sector. The study specifically examined the influence of corporate governance measured by audit committee, board composition, board size and Chief Executive Officer Duality on accountability and transparency and the relationship between corporate governance and ethical practice in the Nigerian financial sector. This study used a descriptive survey research design. The population of the study consists of 102 employees of Pension Fund Administration Companies (Leadway Pensure and ARM Pension) in Ondo and Ekiti States. However, due to the size of the population and the accessibility of the respondents, 50 respondents were chosen at random from the population, including 25 employees of Leadway and 25 employees of ARM. Data for the study were gathered using a self-created survey called the “Corporate Governance and Ethical Practice in the Nigerian Financial Sector” (CGEPNFC). Three null hypotheses were generated and tested at the significance level of 0.05. Data were analyzed using inferential statistics such as correlation and simple regression analysis. The study’s findings revealed corporate governance significantly influenced accountability and transparency. Also, the study revealed a positive correlation between corporate governance and ethical practice in the Nigerian financial sector. Based on the findings, the study recommended that Regulatory bodies, including the SEC and CBN, should increase their efforts to monitor and enforce corporate governance standards. Also, Organizations should invest in training programmes to instill ethical behavior in their employees.

Effect of Agriculture on Sustainable Financial Sector’s Growth in Nigeria

Plethora of studies has been concluded on the relationship between agriculture and economic growth, including a few other sectors of the economy. However, no attention has been accorded the relationship between agriculture and the financial sector in line with Demand-Following Hypothesis. Against this backdrop, this study examined the effect of agriculture on the sustainable growth of the Nigerian financial sector from 1999 to 2020. Data were collected from the secondary source and extracted from the Central Bank of Nigeria’s Statistical Bulletin. Analysis of the data was carried out using Autoregressive Distributed Lags Model (ARDL). The result revealed that the variables were co-integrated in the long-run; in addition, credits granted to agricultural sector by the financial institutions (GCA), amount granted to agricultural sector under Agricultural Credit Guarantee Scheme (ACGS) were positively but insignificantly associated with the growth of the financial sector in the long-run with the coefficients: 0.008GCA (p-value = 0.1511>0.05), 0.002ACGS (p-value = 0.4452>0.05). The productivity of the agricultural sector (AGRPROD) however, with coefficient 1.002AGRPROD (p-value = 0.0001<0.05), was predominantly positive and statistically significant in influencing the sustainability of the Nigerian financial sector’s growth in the long-run; this thus amounted to confirmation of Demand-Following Hypothesis. Furthermore, the lending interest rate maintained negative but insignificant effect on the growth of the financial sector in Nigeria. Based on the foregoing result, the study concluded that agriculture positively and significantly promoted the sustainability of the Nigerian financial sector, and recommended accordingly, that agricultural sector should be given top priority in terms of funds and other resources allocation as this culminates in stimulating financial sector’s sustainable growth in Nigeria.

Digital Lending and the Challenges of Data Protection in Nigeria’s Financial Sector

A healthy financial services sector remains critical for the sustenance of social and economic development of any nation, as it guarantees easy access to finance for developmental purposes. One of such ways of accessing finance is through lending from financial institutions, which are mainly the conventional banks, but the tide is now changing owing to the disruptive effect of Covid-19 pandemic. There became the need to leverage on innovative technology in the Nigerian financial sector to rapidly move from the analog-based financial services to a technologically driven financial sector where services are rendered faster, easier and more accessible to the overall benefit of customers, investors, businessmen and other stakeholders. The advent of Covid-19 pandemic and the subsequent lock downs during the period further exposed the vulnerability of the Nigerian financial sector as access to funding became a challenge to most investors and businesses. To address this unforeseen challenge, the ingenuity of technological innovations was further deployed giving rise to digital lending services (popularly known as loan apps), which hitherto were nonexistent in Nigeria prior to the emergence of Covid-19. Digital lending entails the method of applying, processing, and granting loans with the aid of digital channels where lenders place reliance on personal data of customers accessed online or provided by such customers, to make credit decisions, for the benefit of a customer. As digital lending service is no doubt laudable, it came with associated fresh challenges which included violation of customer’s privacy rights and data protection. The main focus of this paper, therefore, is to examine the concept and practice of digital lending in Nigeria, its legal framework and the challenges of customers data protection and privacy rights in Nigeria. The researchers will adopt the doctrinal legal research method wherein reliance will be placed on primary and secondary sources, and based on the findings, certain recommendations would be made.

Exploitation of Contract Workers in the Banking Industry: Study of Banks in Sokoto, Nigeria

The study assessed the exploitation of casual workers in the Nigerian financial sector, with a specific reference to banks in the Sokoto megalopolis. The objective of the study was to examine the working condition of utmost casual staff in these banks. The study was explicatory and employed a qualitative exploration design; for the purposes of the study, a total of five banks were used as a sample, accounting for 70% of the banks in Sokoto metropolitan. Fifty respondents (casual/contract workers) were purposefully picked from the 171 casual staff members of the selected banks by random sampling to form a sample of the population. Using a key informant interview guide, five management staff members, one from each selected bank, were also interviewed. The study found that the salaries to casual staff in the bank is not commensurate to the work executed, Business Solution enterprises were the major agents in the exploitation of casual workers of banks in Nigeria and these BSFs are possessed by the top directors of the banks; denoting double exploitation, casual staff are being deprived of certain social benefits, allowances, and social security of jobs. The study recommends the perpetration of the transnational labor laws and making of laws to check the casualization of labor in fiscal institutions, that government should ensure strict compliance with the labor laws, and unionization was explosively recommended as a move toward negotiating the rights of casual staff, among others. Keywords: casual, business solution firms, exploitation of workers, workers’ performance. DOI: https://doi.org/10.55463/hkjss.issn.1021-3619.60.80

Financial Development and Economic Growth in Nigeria (1986-2020)

This study examined financial development and economic growth in Nigerian from 1986 to 2020 using data sourced from the CBN statistical bulletin (2020). The Nigerian financial sector is fraught with fissures that have frustrated its potential to facilitate economic growth, Funds accumulated by financial intermediaries are insufficient to cater for the desired level of economic growth. The objective of this study is to find out how financial development has influenced the economy. Financial development was measured by money supply to GDP, insurance premiums to GDP, Stock market capitalization to GDP and private sector credit to GDP while economic growth was represented by real GDP. The study adopted the ex-post facto research design in conducting the research. The data was subjected to statistical analysis using the Ordinary Least Square regression. The findings of the study revealed that money supply to GDP and Market capitalization to GDP has positive and significant relationship with economic growth in Nigeria while private sector credit to GDP and insurance premiums to GDP ratio had negative relationship with economic growth in Nigeria. The study recommends that Credit to private sectors should be channeled to the real sector of the economy which will lead to economic growth .The monetary authorities should also ensure adequate supply of money to facilitate economic transactions for economic growth to desired levels, The monetary authorities should develop policies that aids entry of more establishments into the capital market and Insurance policies should be made to ensure the relevance and increased patronage of insurance sector in Nigeria

Dynamic capabilities and organizational ambidexterity: New strategies from emerging market multinational enterprises in Nigeria

AbstractThis study examines the strategies that firms deploy in developing and scaling up organizational ambidexterity under conditions of environmental uncertainty. Using five emerging market multinational enterprises (EMNEs) in the Nigerian financial sector as case studies the study provides a framework of four main ambidextrous strategies deployed by these firms. Based on the dynamic capabilities' lens, the study found that EMNEs pursue a combination of contextual and structural ambidextrous strategies, including new business models, investment in technology for strategic innovation, developing strategic alliances, and internationalization. These strategies serve as levers of dynamic capabilities for fostering exploration of new business opportunities, while strengthening, enriching, and exploiting their existing capabilities. These findings contribute to enriching the existing literature on ambidexterity by contributing to the ongoing debate about how ambidexterity manifest in EMNEs during periods of environmental uncertainty, particularly from an emerging country context.

Cost-Benefit Implications in the Emerging Electronic Banking Space in Nigerian Financial Sector

The paper evaluated the cost-benefit implications in the emerging electronic banking space in Nigerian financial sector. Data were collected from CBN statistical bulletin and NDIC annual report. Twenty one (21) banks operating in Nigeria constitutes the population of the study and sample size of twelve (14) years was selected through purposive sample method. Auto-Regressive Distributive Lag (ARDL) was used to analyze the data after stationarizing it through Augumented Dicky Fuller (ADF) unit root test. The findings show that ATM, POS and MB have no significant effect while WIT has negative significant on banks’ profit. The findings further reveal that the combination of these variables has positive and significant effect on banks’ profit. We therefore recommend that banks should fully utilize the benefits provided through electronic banking by ensuring that more ATM terminals are provided in order to reduce crowd. Professionals that can constantly put the machine in order should be emlpoyed and there should be constant money in the machine to enable the banks make more profits and serve the people better at all times. POS should be made available to the users and at a reduced cost without hidden charges to enable people of different categories have access to them. This will help to generate revenue to the banks and reduce their cost of transaction etc.

The Effects of Foreign Direct Investment Uncertainty on Financial Development in Nigeria: An Asymmetric Approach

This article investigates the dynamic effects of foreign direct investment uncertainty on financial development in Nigeria and the interacting role of financial inclusion and economic growth. We used the annual time series data of Nigeria covering the period 1970-2018. Through advanced econometric techniques, we first substantiated stationarity level and co-integration among the scrutinized variables, which is genuinely done for reliable findings. Following that, we applied Gregory and Hansen (1996) co-integration test, Non-linear ARDL as the elasticity estimator, and Diks and Panchenko (2006) causality test for the analysis. The Empirical evidence postulates the asymmetric nature of foreign direct investment uncertainty to financial development. We also found a non-linear uni-directional causality running from economic growth to financial development, foreign direct investment uncertainty to financial development, and financial inclusion to financial development. In the end, the authors proposed the needed policy recommendations to strengthen the Nigerian financial sector.

Conservative Business Strategy as Moderator of Board Independence and Corporate Performance Nexus in Nigerian Financial Companies

The relationship between board independence and corporate performance is one that is replete with mixed results. This paper analyzes board independence and firm performance in the presence of conservative business strategy. The issues addressed focus on whether board independence contributes meaningfully to performance and whether conservative strategy amplifies the role of board independence in mitigating agency conflict and thus improving firm value or performance. To address this, 312 firm-year observations of firms in the Nigerian financial sector from 2007 to 2018 were analyzed using the ordinary least squares (OLS) regression model, panel data model, and structural equation model (SEM). In the OLS and panel data models, board independence did not show any significant influence on performance. In both models however, conservative strategy was significant. The inclusion of conservative strategy in the model increased the coefficient of determination (R2) to 32.1% and 31%, respectively, for the OLS and panel data models. In the structural equation model, conservative strategy was also significantly related to performance but negatively related to board independence. The evidence from this study shows that conservative business strategy moderates the link between board independence and firm performance. It is therefore recommended that firms should adopt conservative strategy to gain the monitoring and advisory roles of board independence, especially when true independence cannot be guaranteed.

RISK GOVERNANCE AND FINANCIAL PERFORMANCE: AN EMPIRICAL ANALYSIS

This study examines the influence of risk governance on financial performance of 50 quoted firms in the Nigerian financial sector for the period of five years (2013–2017). Panel data was used to examine how the risk governance variables (Enterprise Risk Management_index, Chief Risk Officer_presence, Board Risk Committee_size, Board Risk Committee_activism, and Board Risk Committee_independence) affects financial performance (Return on Asset). The study reveals empirically that most of the risk governance variables (ERM_index, CRO_presence, BRC_activism, and BRC_independence) have a significant and positive impact on the performance of the firm with the exception of BRC_size which shows a negative association with the financial performance of the studied firms. The study empirically reveals that strong Chief Risk Officer (CRO) presence, effective board risk committee, and inclusion of independent directors in the risk committee will go far in serving as factors that would improve the performance of firms in today’s financial environment. This study made a lot of core findings that contribute to the emerging literatures on risk governance and risk management research.

Financial innovation and the performance of small and medium scale enterprises in Nigeria

The liberalization of the Nigerian financial sector inevitably resulted in the phenomenon of financial innovation. While studies exist that investigate the effect of financial innovation on economic growth in Nigeria, only a few have addressed its impact on the performance of SMEs. Yet, the few existing ones are micro studies that emphasize more on specific regional firms. The dearth of empirical studies at the economy-wide level, therefore, mandates this study, which fills this gap in the literature. This study employs autoregressive distributed lag methodology on quarterly data of financial innovation measures. Our findings indicate that financial innovation has a positive and significant effect on SMEs’ productivity in Nigeria. In particular, of the seven financial innovation instruments used (Automated Teller Machine, Point of Sales, Web or Internet Banking, Cheques, Nigeria Inter-bank Settlement System Electronic Fund Transfer, Nigeria Inter-Bank Settlement System Instant Payment, and Mobile Money Operations), all but one turned out in both the short run and long run as significant predictors of SMEs’ performance in Nigeria. Furthermore, the Toda-Yamamoto causality test reveals unidirectional causation running from financial innovation instruments to SMEs’ performance. These results have implications for SMEs’ growth and the current cashless policy of the Central Bank of Nigeria.

CEO Experience and Firm Performance: Evidence from Nigerian Financial Sector

CEO Experience and Firm Performance: Evidence from Nigerian Financial Sector

Risk governance and cybercrime: the hierarchical regression approach

This study examines the impact of risk governance on cybercrime of selected listed firms in the Nigerian financial institutions. To achieve this, a sample size of 50 listed companies from the Nigerian financial sector was selected for the years 2013–2017, resulting in 250 observations. The study employed the use of hierarchical regression analysis to test the impact of risk governance variables (Chief Risk Officer_centrality, Enterprise Risk Management_index, Chief Risk Officer_presence, Board Risk Committee_size, Board Risk Committee_activism, and Board Risk Committee_independence) and other control variables such as corporate governance variables (Board Size and Board of Directors_independence) and firm characteristics variables (Firm size and firm age) on cybercrime. The study observed from the findings that almost all the explanatory variables present a positive and significant relationship with cybercrime, except the Chief Risk Officer_presence, firm age and Board Risk Committee_size which revealed an insignificant relationship with cybercrime. The study concludes that risk governance variables and other variables are likely to reduce and minimize the impact of cybercrime on the sampled firms used in this study.

Influence of Human Resource Accounting Practices on Managerial Decision-Making

The study examined the influence of Human Resource Accounting (HRA) practices on managerial decision-making. Data for the study were gathered via a structured questionnaire on a 5-Points Likert Scale administered on personnel of Accounting, and Audit/Internal Control departments which were considered to be the relevant departments for this study in 16 quoted firms in the Nigerian financial services sector. The questionnaires distributed were returned and analyzed using a simple regression analysis model. The study found that HRA has a significant impact on managerial decision-making of organizations. It was therefore recommended that organizations should be more proactive in the use of HRA to enhance decision-making. Necessary and relevant standards should also be provided on the need for recognizing human resource cost in organizations’ statement of financial position in order to enhance adequate decision-making in business organizations premised on fair financial reporting.

Economic Integration in the ECOWAS: Implications for Financial Intermediation in Nigeria

The study employed the autoregressive distributed lag (ARDL) approach to co-integration to estimate a set of four models with a view to examining the impact of ECOWAS integration on financial intermediation in Nigeria, which was differentiated by type of financial development indicators (FD) used as dependent variable in the different models. The dependent variables were the proxies for financial intermediation in Nigeria, namely; ratio of credit to private sector provided by commercial banks to national GDP (CPS_GDP); ratio of broad money supply (M2) to GDP (M2_GDP); and ratio of commercial bank’s assets to the combination of commercial banks’ and central bank’s assets (COMB_ASSETS). A composite measure of the three financial intermediation indicator was also used in the fourth model. The study data ranged from 1960 to 2018, and comprised Nigerian and ECOWAS macroeconomic variables obtained from different sources. ADF test was conducted to test for unit root and the result showed that the variables have a unit root. Across the four models, the results of the study showed that ECOWAS regional economic integration does not significantly influence the degree of financial intermediation in Nigeria, and may not be promoting development of the Nigerian financial sector. On the contrary, domestic macroeconomic developments are, however, more supportive of financial intermediation in Nigeria, and suggest the need to improve monetary conditions and credit access and availability. It has become imperative, therefore, to carry out a cost-benefit and impact analyses of the region’s integration to help reposition the country for its benefits. Keywords: economic integration, financial intermediation, autoregressive distributed lag (ARDL), co-integration, ECOWAS, Nigeria JEL Classification: E44, F36, G2, G32, G21. DOI: 10.7176/JESD/11-4-06 Publication date: February 29 th 2020

Does enterprise risk management impact accounting quality? Evidence from the Nigerian financial institutions

This research empirically looked at Enterprise Risk Management impact on accounting quality of selected listed firms in the Nigerian financial sector. The study engaged the use of content analysis of the selected listed firms’ annual financial reports and corporate websites in determining the ERM disclosure index and its impact on accounting quality for a period of five years (pre-ERM period) (2007–2011) and another five years period (post-ERM period) (2013–2017). In attaining the proposed objectives, the study employed the panel Generalized Method of Moments estimator to test the hypotheses and find out the relationship between the variables. The study observed from the findings that there is no significant association between enterprise risk management and accounting quality during the pre-ERM period. This study adds to the body of knowledge in the area of corporate reporting, risk disclosure, risk management and accounting quality in emerging economies especially the Sub-Saharan African countries.

Remittances, Bank Concentration and Credit Availability in Nigeria

The concentration of the Nigerian financial sector has long been recognised to be an important factor affecting the financial stability and welfare at an individual level in the economy. While various studies have been conducted to examine the sensitivity of this phenomenon to macro economy, little has been done to examine the effect of concentration on credit availability in Nigeria. In addition, no study has investigated the role of remittances on the relationship between bank concentration and availability of credit. Taking motivation from the Nigerian banking consolidation exercise, this article examined the effect of remittances and bank concentration on availability of credit in Nigeria. The author employed the autoregressive distributed lag (ARDL) bound test approach for co-integration on Nigerian data for the period of 1986–2015. The results revealed that bank concentration constrains the development of financial sector in Nigeria and remittances improve the level of financial development (credit availability) in the long run but inhibit the availability of credit in the short run. The negative relationship occurs in the short run because of the regulatory framework governing international money transfers in Nigeria, which simply inhibits competition. In the long run, recipients who have received remittances from informal settings would need financial products and services in which those remittances would be banked and further improve the financial sector. It was concluded that since Nigerian financial sector remained underdeveloped, the sector could be driven by encouraging inflow of remittances into the country. Our findings also persist after batteries of robustness check.

Effectiveness of Risk Management Strategies Among Deposit Money Banks in Nigeria

Deposit Money Banks (DMBs) face formidable challenges in order to operate profitably. As business entities poised to maximise shareholders’ wealth, they need to grow their revenue while at the same time keep their cost of funds as low as possible. The threats to achieving this come from the mandatory cash reserve ratio that restricts reasonable chunk of deposits from being invested, and their attempt to build-up deposit portfolio that tilts more towards non-interest paying demand deposit. Since the most profitable assets of the DMBs are the loans and advances, the booking of these risk assets for credit worthy customers who will meet maturing obligations as at when due, constitutes the greatest task to management. This paper is a study to determine how effective risk management practices have been among the DMBs in the Nigerian financial services sector. Survey research design was employed. The study population consisted of twenty-six (26) DMBs from which 10 were selected using purposive sampling technique. The primary data were obtained through a validated structured questionnaire. Reliability of the instrument was assessed, yielding Cronbach’s Alpha coefficients for the constructs that ranged between 0.818 and 0.873. The collected data were analysed using Relative Importance Index (RII) and Mean Score Index. Findings revealed that risk management practices were effective among the DMBs in Nigeria with RII of the 7 segments in the risk management practices above 0.80. The board of directors’ involvement came highest with 0.90. The use of loan syndication came last with 0.82 within the risk management strategy segment. The study concluded that the active interest of the board of directors in the risk management practices contributed immensely to the effectiveness among the DMBs. The study recommends that the Central Bank of Nigeria should bring down the cash reserve ratio that restricts credit creation and causes high cost of funds, and also pay interest rate on cash reserves held by the bank.