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The main objective of this study is to determine the factors that affects competition in commercial banks. competition as a market situation which holds where there are a large number of business firms that are capable of supplying the same or similar services (McKenna and Fleming, 1995).
A subsidiary objective for this study was on the effect of environmental factor on competition in commercial banks, the effect of financial factor on competition in commercial banks, and the effect of customer service on competition in commercial banks. Based on this subsidiary objectives, a questionnaire was developed and a total of 60 respondents were administered the questionnaires. 58 respondents of a total of 60 agreed that environmental factor affects competition in commercial banks, 59 respondents of the total respondents was of the opinion that financial factor affects competition in commercial banks and 60 respondents of the total agreed with customer service as a factor that affects competition in commercial banks with percentages of total respondents of 96.7%, 98.3% and 100% respectively for Yes.
However, it was observed that these factors that affects competition in commercial banks are independent of each other, based on the findings from respondents and data collection. Using 5% level of significance.


Title Page
Table of Contents
List of Figures
List of Tables



1.1 Background of the Study
1.2 The Purpose of the Study
1.3 Statement of Research Problem
1.4 The Objectives of the Study
1.5 Significance of the Study
1.6 Research Hypotheses
1.7 Limitation of the Study
1.8 Structure of Work



2.1 An Overview of Commercial Banking
Industry in Nigeria
2.2 Factors Affecting Competition in Commercial Banks
2.3 Financial Factors Affecting Competition in
Commercial Bank (Assets and Liabilities, Loan
and Advances)
2.4 Customer Service
2.5 Market Structure and Competition
2.6 Competitive Marketing Strategy



3.1 The Bank Credit Theories
3.2 Research Designs
3.3 Population
3.4 Sample Size/Sampling Method
3.5 Type of Data
3.6 Methods of Data Collection
3.7 Data Analysis Tools
3.8 Description of Data Analysis Tools



4.1 Introduction
4.2 Data Presentation/Analysis
4.3 The Percentage Analysis of the Responses to Yes or No
4.4 Cross-Tabulated Analysis
4.5 Hypothesis Testing



5.1 Introductions
5.2 Summary of Findings
5.3 Discussion of Findings
5.4 Conclusion
5.5 Recommendations
Figure No. Title
1.1 The Simple Bar-Chart of the Data of the Sex of the 60 respondents
1.2 The Simple Bar Chart of the Data on the Marital Statuses of the 60 Respondents
1.3 The Histogram of the Data on the Ages of The 60 Respondents
1.4 The Pie-Chart of the Data on the Highest Education Qualification of the 60 Respondents LIST OF TABLES
Table No. Title
1. The Summary of the Personal Data of
2. The Table of Marital Status of Respondents
3. The Histogram of the Data on the Ages of
4. The Percentage Analysis of the Responses to
The Yes or No
5. The Analysis of the Statuses of the Respondents
6. The Computational Details of the Four Hypotheses




The name Bank is derived from the Italian word banco “desk/bench” used during the Renaissance by Florentine bankers, who used to make this transaction above a desk covered by a green tablecloth. However there are traces of banking activity even in ancient time.
In fact, the word traces its origins back to the ancient Roman Empire, where money lenders would set up their stalls in the middle of enclosed courtyards called Macella on a long bench called Bancu, from which the word Banco and bank are derived.
As a money changer, the merchant at the Bancu did not so much invest money as merely convert the foreign currency into the only legal tender in Rome that of the imperial mint. .
McKenna and Fleming in 1995 described competition as a market condition which exist when there are large number of business enterprise, all able to supply the same or similar products or service to a large number of purchase/buyers.
In this last decade there has been a high competition within the banking industry in Nigeria, with the licensing and establishment of more banks bringing the total number of commercial and merchant bank in the country to about eight-seven, there has been high tendency for various banks in the industry to fend for themselves for survival.
A commercial bank is defined as an establishment which accepts deposit from customers that are prepared where loans and advances and general financial business concerning all forms of trade are made. Example of such trade are retail, wholesale, import and export trade.
The 1991 banking decree defines a commercial bank as any institution which carries out banking business in Nigeria which includes a commercial banks, a discount house, financial institution and an acceptance house (Federal Republic of Nigeria 1991).

The commercial banking industry in Nigeria has been positively and negatively affected by competition. In attempt by commercial banks to fend for themselves, many method have being adopted to improve corporate efficiency and maximize profit. This method led the Nigeria banking into scientific approach and investigation into better ways to achieve corporate goals and objective. Some suggested method include expansion of existing operational facilities to area of wider market, improving corporate efficiency, diversification of port folio and investment banking, appropriate marketing, application of combined branch and a little degree of unitary banking, good publicity, employment and development of capable staff and carrying out research for onward positive development and growth.
Also, each day competition in the industry is heightened by emergence of new brand in commercial banks, many of the older commercial banks have bring forced to change in their operation due to the competition. It is interesting to watch older commercial banks paying as much as 14-19% same deposit. Before the 1986 deregulation in the commercial banking industry has been highly regulated.
Economic regulation in general, embraces controls, which government imposes on economic and business activities reaching the maximum regulation, the government can be said to be participating in some non-traditional public sectors activities in order to foster competition and improve economic efficiency. When regulation fails, as it often does the process of deregulation inevitable begins in a bid to avoid a collapse of the whole system. Economic deregulation is defined as deliberate and systematic removal of regulatory controls, structures and operational guideline in the administration and pricing system in the economy.
The underline philosophy of the deregulation of an economy or its component segment is the belief that factors of production, goods and services are optimally priced and allocated when their prices are freely determined in a competitive environment. The aim of the study is to determine four factors affecting competition in the commercial banking industry in Nigeria.


The relevance of commercial banks in the economy of any nation cannot be over emphasized. They are the cornerstones, the linchpin of the economy of a country.
The financial deregulation in Nigeria started in 1987 and the associated financial innovation have generated an unprecedented degree of competition in the banking industry. The deregulation initially pivoted powerful incentives for the expansion of both size and number of banking and non-banking institutions.
The consequent phenomenal increase in the number of banking and non-banking institutions provide financial services which led to increased in competition amongst various banking institution and banking and non-banking financial intermediaries.

Apart from the keen competition with the range of financial activities commercial banks have also faced problem associated with a persistence slow down in economic activities, severe political instability, virulent inflation, worsening economic financial condition of their corporate borrowers and increase incidence of fraud and embezzlement of funds. All these factors of deregulation, competition, innovation economic recession political instability, escalating inflation and frequent reversal in monetary policy have combined to create a challenging and precautious financial environment for banks. Consequence of new financial environment has been rapidly declining profitability of the traditional banking activities. Thus, in a bid to survive and maintain adequate profit level in this highly competitive environment banks have tended to take excessive risk. But, then the increasing tendency for greater risk taking has resulted to insolvency and failure of a large number of banks.
Hence the sole aim of the study is to determine how some of these factors affect commercial banking industry either positively or negatively


This research work is an attempt to answer the following research questions
i. Can we determine the financial factors that affects competition in the commercial banking industry?
ii. Can we determine how environment affects competition in the banking industry?
iii. Can we correlate the number of commercial banks and each of the financial factors namely deposits, total assets, loans and advances?
iv. Can we determine how customers service affect competition in the banking industry?


The main objective of the study is to determine the factors that affect competition in commercial banking industry.
The subsidiary objectives include:
i. To determine the various factors that affects competition in commercial bank.
ii. To determine how financial factors affect competition in commercial banking industry.
iii. To determine how the environment affect competition in commercial banking industry.
iv. To determine how customers services affect competition in commercial bank.
v. To determine the characteristics relevant to the banking industry in a perfectly/imperfectly competition market


This study is significant because of the following reasons:
i. It will generate information in the new millennium on environment, customer service, financial and marketing factors that will make commercial banks in Nigeria to cope well with the competition.
ii. It will provide information on the various factors of competition as it would be useful to economic policy makers. Banks manager and financial institution.
iii. It will be useful to the researcher, student in business management, banking and finances.
iv. It will be useful to the public in general.


Spiegel (1992) observed that in an attempt to reach decisions, it is useful to make assumption or guesses about the populations involved. Such assumptions which may or may not be true are called statistical hypothesis and in general are statements about the probability distribution of the populations. In this research work four hypotheses will be tested that the proportion of the respondents who agreed that:
i. There are financial factors that affect the competition of the banks.
ii. There is freedom of entry and exit of firms in the banking industry.
iii. The better bank is the one that is capable of offering that little extra service over and above what other competition offer.
iv. There are some artificial interference’s with the activities of the commercial banks and their customers.


The use of secondary data has the limitations that the data may be obsolete or its unit of analysis may be different from the one used in the study. Also because the researcher is not the original collector of the data any mistakes or colouring or brake may not be discovered by the research.
The Cross-sectional survey has the limitation that it is “one shot” or almost “two shot” and as a result its capacity for collecting data with which to test the causal relationship of variables is minimized unlike what is the situation when the panel research design is used. Also there is a limitation of an increased unwillingness of the respondents to respond to survey problems.
The questionnaire is limited to the use of verbalished answers to pre-determined question. In the fixed answer format, if a particular answer is missing, this may lead to errors, if a respondent gives his or her answers in a baffling manner there is usually not much that can be done to redress the situation.

The structured and standardized format of the questionnaire may compel the respondents to give answer that they do not fully endorse. A certain level of education is needed for a respondent to fully understand the questions. There is the limitation that the researcher is not a policeman or woman and cannot force the respondents to give answers.
The rigidity of the research instrument may limit the amount of information that can be got. There is also a problem of memory or beyond it when people are expected to remember past facts. There is also the problem that the respondent may need to be motivated to enable them contribute willingly to the completion of the questionnaire. The assumption that there is uniformity from one interviewing situation another may not hold especially in a situation where there are more than one interviewers. There is also the limitation of high cost in the administration of the research instrument especially due to high personnel and travel cost. There are also the limitations of the scarcity of time and money resources.

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