Where have Foreign Banks in Nigeria Gone? Market Structure, Competitive Intensity and the Capabilities of Nigeria Banks

35 Pages Posted: 21 Jun 2019 Last revised: 23 Oct 2019

See all articles by Lilac Nachum

Lilac Nachum

City University of New York - Allen G. Aaronson Department of Marketing & International Business

Chris Ogbechie

Pan-Atlantic University - Lagos Business School

Date Written: June 7, 2019

Abstract

Privately-owned Nigerian banks hold 94% of Nigeria banking assets, the world's second largest share of local ownership. Theoretical explanations for the dominance of local firms related to liabilities of foreignness do not explain this phenomenon, suggesting that foreign banks do not experience additional costs compared to local Nigerian banks. In search for explanation for this puzzle, we focus on market structure and competitive intensity and their impact on capability development. In-depth exploratory study of Nigeria banking industry, based on interviews with industry experts and practitioners and supplemented by secondary data, suggests that the regulatory approach towards both foreign and Nigerian banks instilled market structure and competitive dynamics that were conducive for the development of competitive capabilities by Nigeria banks, whose strength arrested foreign entry. The study throws light on a regulatory approach that incentivizes capability development via discipline imposed by markets rather than by direct government intervention in the form of protectionism or favorable resource provision. It highlights the merits of studying phenomena that are inconsistent with existing theories for theory extension and development.

Keywords: foreign and domestic banks, government policy, institutional environment, firms’ capabilities, liability of foreignness, Nigeria banks

JEL Classification: M16, L1, L22, G18, G21

Suggested Citation

Nachum, Lilac and Ogbechie, Chris, Where have Foreign Banks in Nigeria Gone? Market Structure, Competitive Intensity and the Capabilities of Nigeria Banks (June 7, 2019). Baruch College Zicklin School of Business Research Paper No. 2019-06-05. Available at SSRN: https://ssrn.com/abstract=3400932 or http://dx.doi.org/10.2139/ssrn.3400932

Lilac Nachum (Contact Author)

City University of New York - Allen G. Aaronson Department of Marketing & International Business ( email )

One Bernard Baruch Way, B12-240
New York, NY 10010-5585
United States

Chris Ogbechie

Pan-Atlantic University - Lagos Business School ( email )

Km 22 Lekki Epe Expressway
Ajah
Lagos
Nigeria

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
19
Abstract Views
201
PlumX Metrics