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Market Power of Nigerian Deposit Money Market: Evidence from Bresnahan-Lau’s Approach

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Abstract

Over the years, both structural and conduct regulations had been experienced in Nigerian deposit money market. Structural regulation focused on market structure, featured with the functional separation of firms into complementary activities (for example, caving out microfinance bank from the conventional commercial banking functions), restrictions on entry and rules regarding the operation of foreign banks. However, this structural regulation may tend to make entry difficult, and may tend to protect incumbent firms from competitive pressure. This arrangement might increase the level of market power of Nigerian deposit money market. By definition, market power specifies how firms in a market influence prices, and reveals the level of competition in the market. This study investigated the level of market power in Nigerian deposit money market using Bresnahan-Lau’s model. Annual data for the period of 1986-2012 were sourced from annual financial statements of Nigerian banks and Central Bank of Nigeria statistical bulletin. The model was estimated using Two-stage-Least Square (TSLS). The results revealed that Nigerian deposit money market maintained monopolistic competition. The study concluded that the banking reforms introduced had improve competitive condition of the industry, hence; the practice of monopolistic competition.

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  • M. Ajide, Folorunsho & A. Aderemi, Adetunji, 2015. "Market Power of Nigerian Deposit Money Market: Evidence from Bresnahan-Lau’s Approach," Working Papers 14, Department of Economics, University of Ilorin.
    • Handle: RePEc:ris:decilo:0014
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    1. Folorunsho M. Ajide & Olasupo I. Bankefa & Rufus A. Ajisafe, 2018. "Criminal Activities and Firms’ Market Power: Evidence from Nigerian Banking Industry," Global Business Review, International Management Institute, vol. 19(5), pages 1207-1223, October.
    2. Folorunsho M. Ajide, 2019. "Remittances, Bank Concentration and Credit Availability in Nigeria," Journal of Development Policy and Practice, , vol. 4(1), pages 66-88, January.
    3. Folorunsho M. Ajide, 2016. "Financial Innovation and Sustainable Development in Selected Countries in West Africa," Journal of Entrepreneurship, Management and Innovation, Fundacja Upowszechniająca Wiedzę i Naukę "Cognitione", vol. 12(3), pages 85-111.
    4. Julian Inchauspe & Tom Cronje, 2020. "Concentration and Competition in the Australian Banking Industry: A Bresnahan–Lau Structure–Conduct–Performance Assessment," The Economic Record, The Economic Society of Australia, vol. 96(315), pages 431-449, December.

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