BANKING CONCENTRATION AND BANKING PRICES: THE ROLE OF CRUDE OIL PRICES

Abstract

The degree of competition in the Nigerian banking sector matters for the efficiency of the production of banking services, the quality of banking products, and the degree of innovation in the banking sector. Given the heavy dependence of Nigerian economy on crude oil prices and the need to develop robustness in the performance of banking institutions in Nigeria, this study, which is based on the structure conduct performance (SCP) hypothesis, examines the effect of banking concentration on Nigeria banks’ pricing. The study also investigates the impact of crude oil prices on banking concentration and its effects on bank price. This study adopts the panel static model that involves panel ordinary least squares, fixed effect model, and random effect model to test the empirical model. This study sampled 13 licensed commercial banks in Nigeria for the period 2014-2018. Findings reveal that bank concentration positively affect bank prices. It also shows that crude oil has a negative impact on bank prices. By implication, the role of crude oil can reduce bank competition through bank prices. However, high bank concentration can reduce the crude oil effect on bank prices.