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The Determinants of Supply Side Intermediation Performance of Commercial Banks in Nigeria: An Error Correction Mechanism Approach
Abstract
This paper examined the theoretical and empirical literature on the determinants of the supply side intermediation performance of commercial banks in Nigeria. In order to realize the objectives of the study relevant quarterly time series data were collected from 1994 to 2005. In analyzing the data, the study employed one of the popular
econometric techniques that has attracted much attention in dynamic empirical macro economic research (that is, the error correction model: ECM) with a view to knowing the predictive power. It was found that deposit interest rate (DRI), treasury bill rate (TBR) and foreign exchange rate (FER) are important determinants of the commercial
banks deposit in Nigeria. It was also found that any estimation on the supply side intermediation performance of commercial banks involving the use of the ECM yields better and more reliable results than that involving the use of the orthodox ordinary least square (OLS) method. The paper recommended that in the interest of the economy, the policy of abandoning the traditional banking operation which is lending in preference to trading in the foreign exchange market should be reviewed
and moderated.
econometric techniques that has attracted much attention in dynamic empirical macro economic research (that is, the error correction model: ECM) with a view to knowing the predictive power. It was found that deposit interest rate (DRI), treasury bill rate (TBR) and foreign exchange rate (FER) are important determinants of the commercial
banks deposit in Nigeria. It was also found that any estimation on the supply side intermediation performance of commercial banks involving the use of the ECM yields better and more reliable results than that involving the use of the orthodox ordinary least square (OLS) method. The paper recommended that in the interest of the economy, the policy of abandoning the traditional banking operation which is lending in preference to trading in the foreign exchange market should be reviewed
and moderated.
