CHAPTER ONE
1.1 INTRODUCTION
As we move into the 21st Century, banks all over the world
realize that only those that overhaul the whole of their
payment and service delivery systems and operations are
likely to survive and prosper in the New Millennium. This is
due to the pressures of globalization, consolidation,
deregulation and rapidly changing technology.
Today’s business environment is very dynamic and undergoes
rapid changes as a result of technological innovation,
increased awareness and demands from customers. In view of
this, the banking industry of the 21st Century operates in a
complex and competitive environment characterized by
changing conditions and highly unpredictable economic
climate. In view of the foregoing, the application of
Information and Communication Technology (ICT) concepts,
techniques, policies and implementation strategies to banking
services has become a subject of fundamental importance and
concern to all banks and indeed a pre-requisite for local and
global competitiveness Agboola (2005).
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1.2 STATEMENT OF THE PROBLEM
In Nigeria, the use of computer has become more widespread
in banks than in other sectors of the economy except perhaps,
the energy sector; yet, the banks still have a long way to go in
order to meet the standards of adoption of Information and
Communication Technology (ICT) of their counterparts
elsewhere. There are many problems confronting banks in
Nigeria in their use of ICT. Studies have revealed that most of
the problems facing the banks are telecommunication-related,
and are directly traceable to problems with the public
telecommunication services which are the backbone of their
communication links.
1.3 OBJECTIVES OF THE STUDY
The objective of this research work is to demonstrate in a
schematic manner, the aspects of present-day banking
business where performance could be significantly enhanced
through the application of Information and Communication
Technology (ICT). Banks in Nigeria currently operate in an
environment characterized by a fluid customer loyalty and
intense competition as they scramble to increase their market
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share, and to look for ways of coping with significantly rising
operating cost and dwindling profit.
This research project will examine the general impacts of
Information and Communication Technology (ICT) on the
banking industry. The following objectives will be evaluated:
- To give a comparative analysis between the growth of fixed
telephone lines and mobile phone lines with respect to
growth in ICT.
- To examine using a Trend Analysis, the growth rate of
Intercontinental Bank within the period 2003-2008 with
respect to growth in ICT
- To identify the effect of the volume of fixed telephone lines
and mobile phone lines between 2003-2008 on the
performance of Intercontinental Bank Plc in terms of growth
in loans & advances, customers’ deposits and profit after
tax (PAT)
- To explore the current ICT applications in Nigerian banking
industry
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1.4 RESEARCH QUESTIONS
- What effect has the use of ICT systems like Telephone,
VSAT, MICR, ATM, Computers etc have on
Intercontinental Bank’s productivity
- What effect has the use of ICT-driven technologies have
on customers’ patronage
- What effect has the growth of fixed and mobile telephone
lines have on Intercontinental Bank’s performance
1.5 RESEARCH HYPOTHESIS
HYPOTHESIS 1
H0: Adoption of ICT by Intercontinental Bank Plc has not increased its productivity
HA: Adoption of ICT by Intercontinental Bank Plc has increased its productivity
HYPOTHESIS 2
H0: Adoption of ICT by Intercontinental bank has not
improved customer’s patronage
HA: Adoption of ICT by Intercontinental bank has improved customer’s patronage
HYPOTHESIS 3
H0: There is no variation of growth in ICT systems
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HA: There is variation of growth in ICT systems
HYPOTHESIS 4
H0: Growth in Intercontinental Bank’s performance is
independent on ICT
HA: Growth in Intercontinental Bank’s performance is dependent on ICT
1.6 SCOPE AND LIMITATION OF THE STUDY
Due to unavailability of data and the state of diffusion of ICT in
this part of the world, the researcher employed secondary
data of the bank during the introduction of General System of
Mobile communications (GSM). Also, the data on ICT was
collected before and after the introduction of GSM.
However, the study is strongly limited to cover the period of
1995 to 2008. Specifically, the study divides the period into
three; 1995-2008(growth rate of fixed and mobile telephone
lines), 2003-2008 (growth rate of fixed and mobile telephone
lines against Intercontinental Bank’s Performance) and lastly
2003-2008 (performance of Intercontinental Bank Plc)
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1.7 JUSTIFICATION OF THE STUDY
In the early stages of globalization, deregulation and
consolidations, organizations usually dedicate more resources
and priority to financial and personal issues, downplaying
operational issues like ICT and its relative importance to
organizations. The increasing competitive pressures on
companies, many of which operate in a global economy (e.g.
banks), has been a strong driver for ICT adoption. Firms are
constantly searching for opportunities to cut costs and ICT
holds great promise in this respect as it increases the
efficiency of a firm’s business processes, both internally and
between trading partners in the value chain.
Now, the use of ICT among Nigerian banks is no different
where its role as a core operational driver was established in
the early 1990’s; transforming the delivery of banking
products and services. The availability of communications
networks and clients/server technology saw the birth of
‘online, real-time” banking where all or some branches had
access to computing resources (usually located at the bank’s
head office).
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Today, the mere possession of online real-time technology is
no longer a source of competitive advantage for all operators
in the sector. The role of ICT has evolved today, where banks,
in addition to automating processes and improving service
delivery, implement ICT solutions that facilitate various
business strategies and thus, offer competitive advantage.
This study is of great importance considering the fact that
entry barriers to some industries have been greatly lowered
by leveraging on ICT. Also, the pace of globalization,
liberalization, deregulation, commercialization, and
privatization is rapidly opening up markets and making the
existing ones more competitive. This study highlights various
opportunities presented by Information and Communication
Technology (ICT) that can be harnessed in order to compete
favourably in this increasingly competitive and unpredictable
business environment. This study is justified in the sense that
it highlights the imperative of ICT and its inherent dynamism.
1.8 SIGNIFICANCE OF THE STUDY
Electronic communication using digital information and
communication technologies is already the standard means of
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inter-organisational and inter-country communication in most
developed world, and also increasingly in the third world
countries. They are helping individuals, companies and
countries to store and transmit information held anywhere in
the world, and to communicate them across the globe
irrespective of time and space. This means that whoever does
not have the technical infrastructure to participate in this new
mode of communication would not be able to trade or relate
with other individuals, companies or countries of the world in
the coming century. Therefore, this study is significant
because Nigerian banks cannot afford to let this opportunity of
embracing Information and Communication Technology (ICT)
pass it by.
1.9 ORGANISATION OF THE STUDY
The arrangement of the research is as follows:
Chapter One: introduction already explained above,
statement of the research problems, objectives of the
research, research questions, research hypotheses, scope of
the study and justification of the study.
Chapter Two: background to the study
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Chapter Three: Literature Review and Theoretical Framework
Chapter Four: Research Methodology and Empirical Analysis
Chapter Five: Summary of findings, Conclusions &
Recommendations.
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CHAPTER TWO
BACKGROUND TO THE STUDY
2.1 INTRODUCTION
The advent of information and communication technology
(ICT) is rapidly changing the banking industry; it is a powerful
force that drives the world towards a converging commonality
(Levitt, 1992). From the beginning of human race, technology
has been one of the most essential and most important factors
for the development of mankind (Coombs et al, 1987).
Information Technology (IT) can be defined as the modern
handling of information by electronic means, which involves its
access, processing, storage, retrieval, transfer and delivery.
Research shows that information and communication
technology (ICT) affects financial institutions by easing
enquiry, saving time and improving service delivery.
Some of the ICT technologies presently in use in the Nigerian
banking industry are ATMs, Smart Cards, telephone, facsimile,
wireless radiophone, VSAT (very small aperture satellite
terminal), telegraphy and computer systems. Some banks in
Nigeria have LANs (local area networks) in most of their
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branches and some of the banks have initiated home banking
services. Nigerian banks are yet to reap the full benefits of
Information and Communication Technology (ICT). This is due
to the problems of infrastructural facilities, economic and
regulatory variables of their operating environment. These
problems have to be surmounted in order to fully realize the
benefits of Information and Communication Technology (ICT).
2.2 COMPARATIVE ANALYSIS-THE CASE OF DEVELOPING ECONOMIES
However, similar growth and development driven by ICT have
not been fully witnessed in developing countries. For instance,
Dewan and Kraemer, (2000), found that the contribution of ICT
to economic growth in developing countries was statistically
insignificant compared to that of developed economies. In
another study, Pohjola M. (2000), found that the rate of return
from ICT in developing countries from 1980’s to mid 1990’s
was less than 2% compare to 10% in developed countries
during the same sampled period. The lower return from ICT in
developing countries is attributed to inadequate
infrastructure/enabling environment to support ICT
development in the economy. This problem is further
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compounded by the low ICT literacy level among the
population.
The idea that modern ICT services and policies have positive
impact on economic growth (and conversely their absence is a
major obstacle to growth) was a general conclusion of two
conferences jointly organized by the Telecommunication
Development Bureau of International Relation program of
Webster University in Geneva, September 1996 and February
1998 under the title “Telecommunication and Economic
Growth”.
In trying to analyze the relationship between ICT and
economic growth with particular reference to some African
countries e.g. Nigeria, one is often confronted by unavailability
of data. Thus, to study the impact of ICT, another route was
adopted. A traditional way of identifying a major growth
industry is by looking at the elasticity of demand for the
output of the sector with respect to total demand in the
economy (GDP). To measure the impacts of ICT on GDP, we try
to answer the following questions:
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a. what is the share of ICT sector in the principal macro-
economic variables (GDP, investments, employment and
exports)?
b. does the share of ICT tend to rise in some or all of these
key variables?
In defining ICT sector, the key variables are:
a. ICT services such as the internet and telecommunications
b. ICT equipment such as the number of personal
computers (PCs) and the number of telephone lines
(compudensity and teledensity)
c. Employment in the service and equipment sectors
Year Growth in IT staff
Total employment in ICT sector
Total organization budget in ICT investment (Millions)
GDP @ current basic prices
2000 1,520 N/A 464 4,582,127.30
2001 1,868 N/A 523 4,725,086.00
2002 2,547 N/A 719 6,912,381.24
2003 N/A 446,000 N/A 8,487,031.58
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Source: CBN Economic and Financial Review September, 2006 and NITDA
2.3 REVIEW OF THE NIGERIAN BANKING SECTOR AND ITS PERFORMANCE
The oldest commercial banking institution in Nigeria is the
First Bank of Nigeria. It began operation in 1892, with the
name African Banking Corporation (ABC). In May, 1893, it
assumed the new name, Bank of British West Africa (BBWA)
and in 1912, it bought over a rival bank, the bank of Nigeria. In
1957, the name was changed to the Bank of West Africa
Limited. After five years of negotiation, the Bank of West
Africa (BWA) merged with the bigger bank, the Standard Bank
and was incorporated on June 20, 1969 under the name
Standard Bank of Nigeria Limited. In 1979, the Standard Bank
of Nigeria Limited was renamed the First Bank of Nigeria.
Another colonial bank with chequered history is the Barclays
Bank D.C.O. It was renamed Union Bank (Nigeria) Limited in
1979 following the discovery of its financial connection with
apartheid South Africa, a situation most unacceptable to un-
apartheid Nigeria.
At the end of World War II, another foreign bank, the British &
French Bank of Commerce & Industry established a branch in
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Nigeria in 1949. From 1956, it was simply called the British &
French Bank. In 1961, the bank was renamed the United Bank
for Africa (UBA) with the French, Italian, British and Dutch
companies as shareholders.
Another major commercial bank of foreign origin to establish
in Nigeria is the International Bank for West Africa, now
Afribank. These four banks are referred to as the “big four” in
Nigeria’s commercial banks categorization. These foreign
banks of the colonial era discriminated against Nigerian
businessmen but financed a restricted group of customers, the
colonial government, the marketing boards and the foreign
firms.
2.4 MUSHROOMING OF EARLY INDIGENOUS BANKS
In order to break the monopoly of the colonial banks,
indigenous banks mushroomed in the absence of a Banking
Ordinance to regulate banking business. The first attempt to
establish an indigenous bank was in 1929. Indigenous West
African businessmen resident in London acquired a bank in
London and transferred its operation to Lagos. Because of bad
15
management, the bank known as the Industrial and
Commercial Bank folded up in 1930.
In short, between 1947 and 1952, there was a rush to fill the
banking gap created by discriminating foreign banks. During
this period about 100 indigenous banks were established but
majority of them were grossly under-capitalised, mis-managed
and over-stretched. A number of the indigenous banks
collapsed between 1952 and 1960. Out of the twenty eight
(28) banks founded in 1952 alone, twenty two (22) crashed
and of all the 185 banks registered between 1947 and 1952
only 25 survived.
2.5 THE COLLAPSE OF INDIGENOUS BANKS
The 30’s and 40’s witnessed mushrooming of mainly under-
capitalised and mis-managed indigenous banks which
collapsed as suddenly as they emerged. The collapse of these
banks led to the promulgation of the Banking Ordinance of
1952, following Paton’s 1948 Official Enquiry on why those
banks collapsed. This was the first attempt to put down the
condition under which a bank can operate in Nigeria. Others
are the Banking Act of 1958, 1969 and the Banking and Other
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Financial Institution (BOFID) Decree No. 25, 1991 and the
amendment.
To cap it up, the period 1947-1952 were littered with debris of
failed banks; therefore, it is not erroneous to conclude that the
Nigerian Banking History has been repeatedly punctuated with
bank failures. Nevertheless, to remain competitive, some
banks have deployed information and communication
technology (ICT) into their operations. The use of ICT by banks
in their operation has gathered momentum in recent years.
Liberalization brought several changes to Nigerian banking
industry, as new privately-owned banks came on board as
technology-savvy banks and offered several innovative
products at the front office for the customers based on
technology, the demonstration effect caught on multi-channel
offerings like machine-based (ATMs and PC-banking), card-
based (credit/debit smart cards) communication-based (tele-
banking and internet banking) ushered in anytime-anywhere
banking to customers. Banks sought economy of scale in
banking services at the expense of size; they sought optimal
business structure and secured the competitive imperative of
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economy of scale. It is evident that the adoption of information
and communication technology (ICT) has facilitated easy flow
and safe storage of information. It has been successfully
employed to improve customer service, enhance decision
making process, reduce the strain on management and make
overall banking operations more efficient and less
cumbersome.
Number of banks that adopted various ICT products at different periods.
ICT Product 1990-1992
1993-1995
1996-1998
1999-2001
2002-2004
Automated Teller Machine (ATM)
- - 1 4 14
Electronic Fund Transfer (EFT)
4 1 3 10 14
Electronic Data Exchange 2 2 4 5 7Smart Card - - 1 12 11MICR Cheques - 20 10 4 1Local Area Network (LAN) 13 8 6 5 3Wide Area Network (WAN) 5 3 7 13 5Point of Sale System (POS) 2 1 3 6 9Telephone Banking - - 3 10 12Make cheque available programme
1 1 3 7 10
Computerized credit rating 1 3 2 6 13Daily calculation of accounts programme
19 2 4 6 3
Source: Research Survey, 2004
Table 1 shows that the adoption of most of the ICT products in
the studied banks took place within the last five years.
Automatic Teller Machine (ATM), Smart Cards and Telephone
banking were not available between 1990 and 1996 in any of
the studied banks. Only one bank claimed to have Electronic
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Home and Office banking services within the period. However,
striking exceptions were noticeable in the adoption of MICR
and LAN technologies where most of the banks adopted their
use before 1998. The reason for the early adoption of MICR
technology was due to the mandatory stand of the apex bank
(CBN) on a phased automation of clearing house scheduled to
come into operation between 1990 and 1993. Since MICR
cheques were central to the implementation of this policy,
most banks were forced to adopt its usage. Early adoption of
LANs was influenced by the advent of micro-computers in the
fourth generation which made inter-connectivity feasible.
However, there is growing evidence that customers have
started associating quality of service in a bank with the bank’s
possession of an “on-line real-time” systems. As a result of
anchoring their operations on computer-based delivery
systems, the new generation banks have become very
profitable. Banks and other financial institutions in Nigeria
currently operate in an environment characterized by fluid
customer loyalty and intense competition as they scramble to
increase their market share and at the same time explore
avenues to cope with high staff turnover, and significantly
19
rising operating cost. In view of the enlarged scope of the
banking business in Nigeria, service delivery channels have
been improving to meet the ever-changing needs of
customers. This development has brought improvement into
the Nigerian banking industry.
2.6 INFORMATION AND COMMUNICATION TECHNOLOGY IN THE BANKING INDUSTRY
Information and communication technology has already
become the digital nervous system of banks the world over.
This is because banking is no longer perceived as merely the
generating of deposit liabilities and the creation of liquid
assets; but rather the generation, storage, manipulation,
communication and application of financial information. ICT is
perceived as an instrument for engendering competitive
advantage in enterprises as it promotes greater efficiency and
effectiveness in financial transactions. The importance of ICT
in enabling enterprises develop more efficient and effective
operational and management process have been pointed out
by Frenzel (1996). It is also the reason Holloway (1995), wrote
that an increasingly important component of bank’s
technological focus is the personal computer.
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The Nigerian banking industry has demonstrated a fair amount
of competence in its quest for ICT adoption and applications,
some banks were at the cutting edge of IT and had a clear
vision of how IT could be further harnessed and applied
successfully.
According to Woherem (1997), Nigerian banks since the
1980’s, have generally performed very well in their
investment profile and use of IT systems. Banks have spent
millions of Naira on ICT every year in a bid to fully automate
its operations and services to customers. The industry
recognized that ICT was a major key to its development. Also,
as a result of the increased demand for deposits, Nigerian
banks have realized the imperative of good and prompt
customer services. Also, due to the fact that some customers
lost their deposits in the erstwhile technically-insolvent banks,
they have realized that one way in which they can provide
quality service is through the use of information and
communication technology (ICT). Hence, there is a growing
rate of adopting new technologies in Nigerian banking
operations. This has brought to light, the fact that ICT has
increased competition within the industry. The realization that
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the market size is not really increasing, has made banks more
competitive. Also, the expectation of their customers is very
high and in response, banks are using ICT to satisfy the
demand for quality services and products by customers.
As a result of anchoring their operations on computer-based
delivery systems, the new generation banks have become
very profitable. They have introduced integrated banking
systems using WANs (Wide Area Networks), thus, their
customers no longer have to carry cash for a long distance.
Intercontinental Bank Plc is a good example of banks that
have integrated on-line, real-time banking systems.
Generally, the banking industry in Nigeria has witnessed an
unprecedented growth in the past decade, due mainly to
deregulation of the economy. Deregulation of the economy
brought about increased competition but the low cost of
computer technology has made entry into the industry easier.
Banks have expanded their branch networks at a very rapid
rate, and there are now far more employees, larger customer
and staff database, more robust computer systems and a
general high level of automation and computerization than in
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the late 1980s. This has brought an increase in the need for
exchange of information between different banks and between
branches of the same bank. The present vogue of having an
on-line real-time banking network across branches of some
banks has also promoted the importance of electronic
communications between banks. This growth has created a
requirement for greater exchange of data and information
within and between banks and other financial institutions. This
growing need for exchange of electronic information has
however, not been met with a commensurate improvement on
nationwide telecommunication infrastructure.
Despite the fact that many of the new generation banks based
their marketing strategy on the possession of supposedly on-
line real-time systems, security of information systems was
found to be very vulnerable in general. The amount of
resources required for security is lower than required. The fact
that “hackers” can still get into banking systems easily
without insider help demonstrates the magnitude of the
problems. It is found that their system links are usually down
for about 50 percent of their time. Many customers feel
cheated and frustrated by this reality and do complain about
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these incessant downtimes. IT fraud also, is a major problem
of the banking industry especially where plastic cards are
concerned. The increased IT knowledge of the general public
and proliferation of cheap computer technology means that
weaknesses in card payment may be exploited fraudulently.
Millions of Naira is lost every year simply because the cards
are not secure enough.
2.7 PAYMENT SYSTEMS
The payment system witnessed significant development from
2003 to 2008. Notable among these were; the reduction of the
clearing cycle from T+5 to T+2 and the harmonization of up-
country and local clearing cycles with a view to reducing
floats; the opening of six clearing houses to increase access to
financial services in the new branches; installation of Magnetic
Ink Character Recognition (MICR) machines at the new
clearing houses and the deployment of the Nigeria Automated
Clearing System to the Port Harcourt zone to increase the
efficiency of the clearing process.
The use of electronic payment system which was at a very
rudimentary stage in 2003 recorded significant improvements
24
in 2008. At the wholesale payment segment the CBN Inter-
bank Funds Transfer System (CIFTS) was adopted for the
transfer of Naira deposit on behalf of Bureau de change and
remittance of taxes collected by DBMs on behalf of Federal
Inland Revenue Service (FIRS).
The use of e-payment such as ATM, Web-internet (POS), and
mobile payments, increased both in volume and value with
ATM accounting for 90.5% of transactions in 2008
Market Share in E-payment Market, 2007 and 2008
e-payment segments
Volume volume volume Volume
2007 2008 2007 2008
ATM 15.7
(88.9)
60.1
(91.0)
131,562.7
(88.5)
399,712.6
(90.5)
Web (Internet) 0.9
(5.1)
1.6
(2.4)
10,622.6
(7.1)
25,054.5
(5.7)
POS 0.4
(2.4)
1.2
(1.8)
6,442.1
(4.3)
16,115.3
(3.7)
Mobile 0.7
(3.8)
3.2
(4.8)
95.6
(0.1
697.8
(0.2)
Source: Report of the Financial Sector National Technical Working Group.
N/B: Figures in brackets are percentage share of total.
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2.8 BACKGROUND INFORMATION ON INTERCONTINENTAL BANK PLC
The bank was founded in March, 1989 as the Nigerian
Intercontinental Merchant Bank Plc, a wholesale bank
established in response to the growing needs of an
increasingly sophisticated banking public. With a corporate
philosophy emphasizing innovations, service, excellence and
customer focus, Intercontinental Bank Plc soon made its mark
as a bank of choice among customers in need of reliable and
prompt services backed by state-of-the-art technology.
Within five years of existence, precisely 1993, the bank was
adjudged the top issuing house in the first deregulation rating
of the market, with its pre-tax profit of N592.6 Million for the
same year was the highest in the merchant banking sub-
sector. The bank has maintained this trend of profitability and
its group profile result surpassed the One Billion Naira mark in
1998. Intercontinental Bank Plc has also grown to become one
of the largest and most diversified financial service groups in
Nigeria, with a controlling stakes in equity bank, substantial
interest in a discount house, Intercontinental Capital Markets
Ltd, an associate company, Intercontinental Securities Ltd,
26
which in turn has a majority stake equity stake in an insurance
firm, WAPIC Insurance Plc. The bank has sustained its strong
innovative roots as evidenced in its market-leading treasury
products such as the Intercontinental i-Cash International
product designed as a safe, convenient and robust medium of
effecting settlement of due payment such as remitting school
fees to wards anywhere in the world and the Intercontinental i-
Cash Mobile to serve the needs of people in Nigeria who
desire the fastest means of transferring funds to their loved
ones, folks, friends and business partners through the use of
mobile phones.
In July, 1999, Intercontinental converted to a commercial
bank, to better position it for excellent service delivery to both
local and international clientele in the next Millennium. The
total asset base of Intercontinental Bank Plc hit a record high
of N110.6 Billion according to financial results for the first
eight months of 2004 approved by the Central Bank of Nigeria
(CBN) Weekend. The growth is about 70.6 percent rise over
the N64.8 Billion recorded in the corresponding period of
2003. The bank is adopting a robust consumer and corporate
banking approach designed to sustain market leadership and
27
competitiveness through market segmentation, customer
relationship management (CRM), product innovation,
improved service delivery and low cost channel distribution.
They have strategic partnerships with world-class financial
institutions including BNP Paribas, Veetis Capital, AIG
Investments, ECP Investments and other leading organizations
for capacity building. The bank is leveraging these
relationships to further develop competencies in asset
management, consumer finance, insurance and risk
management. With over 300 branches spread across Nigeria
and 8 in Ghana, the bank is making inroads in Africa through
its regional expansion strategy. In 2006, the bank commenced
global expansion drive with the acquisition of Citi Savings and
Loans Company Limited in Ghana which it has since
transformed into a universal bank-intercontinental Bank
Ghana with eight branches located at key commercial hubs in
Ghana. The bank’s UK subsidiary has obtained approval and
has commenced operation.
2.9 INFORMATION TECHNOLOGY IN NIGERIAN BANKING INDUSTRY (WITH REFERENCE TO INTERCONTINENTAL BANK PLC)
28
The banking sector is undergoing fundamental changes. The
deregulation and consolidation of the industry at the in this
decade is mainly responsible for these changes. Deregulation
has opened up the market, and as such, introduced several
threats and opportunities. Since banking involves the
collection, storage, retrieval and manipulation of information,
this competitive trend within the sector suggests the need for
a more dynamic and innovative approach to the management
of information systems, hence the use of information and
communication technology. In its quest to become an
established player in the industry, Intercontinental Bank Plc
introduced ICT into its operations to enable former time-
consuming tasks to be digitalized, thereby allowing personnel
to be re-assigned to higher margin non-routine jobs.
Furthermore, the strategic importance of ICT is growing
because of its potential to reduce costs of banking services,
bring them closer to users and consequently attract new
clients. Intercontinental Bank’s banking operation is primarily
driven by ICT, which renders the Teller superfluous by
automating the traditional labour-intensive settling of
accounts. While Automatic Teller Machines (ATMs) and credit
cards were the early enablers to reduce the need for front-
29
desk service workers like cashiers etc, the internet now offers
the possibility of offering and using ubiquitous financial
services from virtually everywhere. Also, the use of ICT has
made formerly paper-based task and routine tasks performed
by humans increasingly redundant as routine and standard
banking operations are increasingly being performed digitally,
thus, feeing employees to perform more complex and
stimulating tasks. The bank has integrated ICT into its
production processes and quality management and, most
recently, in marketing & customer services. These are widely
considered as key to improve competitiveness. Competing in
global market requires not only optimized cost structures,
maximal efficiency, and products and services of high quality
but also the ability to communicate effectively and cooperate
with business partners and potential customers.
Furthermore, as a result of increased competition that has
lowered margins in lending operations (the bank’s traditional
business), banks have diversified their sources of income and
rely increasingly on income from fees services e.g. ATMs
charges rather than interest rate spreads.
2.10 SOFTWARE OPTIONS30
From the Nigerian Deposit Insurance Corporation (NDIC)
survey (1991), about 85% of Nigerian banks, especially the
new generation banks have implemented packaged banking
systems on minis or super micros such as Micro banker, Bank
master, Kapiti, Banker80, Globus, Bankos, Pinacle
HRIS/Payroll, Mega-man, Phenix, Flex Cube and other
proprietary software installed in the respondent banks
including Intercontinental Bank Plc. Functional managers of
the banks have terminals through which they could personally
access customer records and make prompt decisions. Other
on-line options available include:
i. Transaction enquiries on customers’ accounts
ii. Customer’s account balance enquiry
iii. Clients’ account maintenance (average balance)
iv. Stopped cheques and accounts enquiries (cheque
maintenance)
v. Statement
vi. Requests
vii. Customers’ particulars maintenance
viii. Batch balance enquiry at closing time.
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Control measures are usually used along with these options in
order to guard against abuse. An important one is the use of
access number and test keys. Every authorized user is
provided with a password in the form of access identification
code with which he could be identified when accessing the
system. In addition, users are restricted to only the options
relevant to their core competencies (sign on right for different
units).
2.11THE MICRO BANKER MANAGEMENT INFORMATION SYSTEMS
The bank’s automated management system apart from the
direct access provided by the on-line facilities satisfies its
house keeping routines by making information reach
managers by way of a whole variety of analysis from statistical
statements which can generally be referred to as reports.
These may be classified into three broad categories.
a. Report providing background information for operational
management, usually produced weekly:
- Financial report balance sheet
- Fixed asset report
- Staff personal records
32
- Customers’ liabilities report
- Inter-branch account reconciliation
- Reports from the stationery and supply inventory system
b. Report which provides control information for influence and
guide current and short-term tactical decisions:
- Credit control report reflecting customers’ withdrawal and
deposits trends)
- Overdue loans reports
- Dormant accounts reports
- Stopped cheques and accounts reports
- Daily customers’ account maintenance reports
- Audits trail reports
c. Reports which provide statistical data for forecasting
corporate planning and strategic management:
- Investment appraisal reports
- Budget models
One of the advantages of information technology-driven
management information system (MIS) is that, timely and
33
accurate returns are made automatically to the interested
parties especially, the CBN. Failure to comply usually attracts
stiff sanctions. Furthermore, an information technology-driven
management information system possess flexible properties
which enables banks to cope with changes in their operational
environment e.g. unusual request from customers, sudden
changes in interest and foreign exchange rates.
The core business and customer-centric strategy at
Intercontinental Bank Plc is based on the seamless integration
of customers, people, processes, technology and risk. This
approach tailors branch services to meet the needs of the
market and it is centered on the delivery of excellent
customer solutions by focusing on providing products targeted
to the demographics of a local market, this significantly
improves contacts for customers while driving deposit
mobilization and customer satisfaction. With over 300
branches spread across Nigeria and 8 in Ghana,
Intercontinental Bank Plc is one of the foremost provider of e-
banking services in Nigeria, with over 30 products and
services that are ICT-driven and the bank is structured to
deliver the greatest convenience to their customers. The 34
bank’s broad customer base, and improved product range
coupled with considerable cross-selling potential has provided
a sustained boost to the bank’s earnings power. The bank has
posted strong results as reflected in the outstanding growth of
its major indices.
Customer Deposits NGN Million
Table 2.11.1
Year Amount (NGN)2003 35,5842004 50,2442005 110,0132006 252,2802007 467,9332008 1,057,079
Source: Intercontinental Bank Plc Publications
From table 2.11.1 above, mobilization of savings increased
exponentially from 35,584 in 2003 to 252,280 in 2006 and to a
total deposit of 1,057,079 in 2008. This figure was the highest
in the banking industry in Nigeria and this made the bank to
become the first to cross the N1 Trillion deposit mark.
Table 2.11.2: Loans and Advances to Customers NGN
Million
Year Amount (NGN)2003 12,602
35
2004 21,6532005 52,5982006 161,3572007 262,5362008 435,457
Source: Intercontinental Bank Plc Publications
The consistent increase in loans and advances to its
customers indicate that innovations has become a great
strength of the bank which has impacted in the huge customer
base which in turn help the bank create new and better
products and services thereby engendering customers’
satisfaction. To sum it up, it is safe to conclude that even
though the bank is faced with the challenges of poor
infrastructure in the economy, the bank is well-positioned to
creatively tackle the challenges of the future.
36
CHAPTER THREE
LITERATURE REVIEW AND THEORETICAL FRAMEWORK
3.1 INFORMATION AND COMMUNICATION TECHNOLOGY (ICT): ISSUES AND CONCEPTS
Today’s business environment is very dynamic and undergoes
rapid changes as a result of technological innovation,
increased awareness and demands for customer. Business
organizations, especially the banking industry of the 21st
Century operate in a complex and competitive environment
characterized by these changing conditions and highly
unpredictable economic climate. Information and
communication technology is the centre of the global change
curve. Laudon and Laudon, (1991), contend that the
application of information and communication technology to
banking services has become a subject of fundamental
importance for competitiveness. ICT directly affects how
managers decide, plan and what products and services are 37
offered in the banking industry. It has continued to change the
way banks and their corporate relationships are organized
worldwide and the variety of innovative devices available to
enhance the speed and quality of service delivery.
Harold and Jeff (1995), contend that financial service providers
should modify their traditional operating practices in order to
remain viable in the 1990s and the decade that follow. They
claimed that the most significant shortcoming in the banking
industry today is a widespread failure on the part of senior
management in banks to grasp the importance of technology
and incorporate it into their strategic plans accordingly.
Woherem (2000) claimed that only banks that overhaul the
whole of their payment and delivery systems and apply ICT to
their operations are likely to survive and prosper in the new
Millennium. He advised banks to re-examine their service and
delivery systems in order to properly position them within the
framework of the dictates of the dynamism of information and
communication technology. The banking industry in Nigeria
has witnessed tremendous changes linked with developments
in ICT over the years. The quest for survival, global relevance,
maintenance of existing market share and sustainable 38
development has made the exploitation of the many
advantages of ICT through the use of automated devices
imperative in the industry.
It is no longer news that technological breakthroughs,
especially in information and communication technology (ICT)
have brought unprecedented benefits to economies
worldwide. These positive externalities by ICT are observable
in all sectors of the economy – in the ICT-producing sector as
well as the ICT-using industry. Generally, ICT enhances
business efficiency, enables swifter product market
penetration, promotes superior labour productivity, creates
avenues for rapid exchange of information, improves logistics
and delivery systems as well as facilitates efficient services to
customers. ICT allows countries to deal with the challenges
pertaining to the society, the economy and the environment.
Effective management of these challenges, via ICT, can boost
economic growth in any economy.
Various studies have examined the relationship between ICT
and economic growth particularly in the 1990’s. However, in
39
general, most of these studies covered developed nations. The
famous seminal research by Solow, on the contribution of
technology on productivity growth in the US sparked great
interest among scholars on the relationship between
information and communication technology and economic
growth of developed countries, especially in the US.
Several Asian countries, namely Singapore, Japan, Korea and
Taiwan (the Asian Tigers) have also benefited from ICT
development. According to Dunt and Harper, (2002),
investment in ICT has contributed positively to labour
productivity in Australia. Lau and Tokutsu, (1992), examine
the relationship between ICT and economic growth in the US
over the period 1960 to 1990 using the production function
approach; they found that ICT had contributed nearly half of
the national output during the study period. Kraemer and
Dedrick (1994), examine the impact of ICT on eleven Asian-
Pacific countries for the period of 1983 to 1990. Again, using
the production function approach, they found a significant
positive relationship between ICT and economic growth
particularly in countries that have invested heavily on ICT,
such as Singapore, Japan and Korea.
40
Niininen, P, (1998), estimates the contribution of ICT to
Finland’s economic growth over the period of 1983 to 1996
using the growth accounting framework, the empirical study
results showed that compared to other factors, ICT stood out
as a greater influence on economic growth in Finland. Daveri,
F, (2000), examines the contribution of ICT on economic
growth in eleven OECD – (Organisation of Economic Co-
operation and Development) countries, using the growth
accounting framework, the author found that ICT contributed
significantly to economic growth of most OECD countries
especially during the mid 1990’s and concluded that all the
sampled OECD countries gained economically from ICT
investment over the years. Again, using the growth accounting
framework, Oulton, (2001), examines the contribution of ICT to
economic growth in UK over the years 1989 to 1998, the
empirical results highlight that ICT had contributed
significantly to economic growth in the UK, especially from
1994 to 1998. Colecchia and Schreyer, (2002), estimate the
contribution of ICT in output growth in nine OECD countries
over the period 1980 to 2000. The empirical results show that
ICT contributed between 20% and 50% of the national output
41
growth over the study period in most countries which later
increased to 30% to 90% per annum in mid 1990,s.
Piatkowski, M. (2003), investigates the impact of ICT on
economic growth in Poland over the period 1995 to 2000,
using the growth accounting framework. This study found out
that ICT investment contributed nearly 9% of Poland’s
economic growth during the sampled period. Mas and
Quesada, (2005), used data on ICT investment and examine
its contribution to economic growth in Spain from 1985 to
2002. Their results show that ICT had a strong impact in the
intensive ICT-using sector compared to other sectors.
Information technology (IT) is the automation of processes,
controls, and information production, using computers,
telecommunications, software and ancillary equipments such
as Automated Teller Machines (ATM) and debit cards (Khalifa,
2000). It is a term that generally covers the harnessing of
electronic technology for the information needs of a business
at all levels. Irechukwu (2000) lists some banking services that
have been revolutionalised through the use of ICT as account
opening, customer account mandate and transaction
42
processing and recording. Information and communication
technology has provided self-service facilities from where
prospective customers can complete their account opening
documents direct on-line. It assists customers validate their
accounts numbers and receive instruction on when and how to
collect their cheque books, credit cards and debit cards.
Communication technology deals with the physical device and
software that link various computer hardware components and
transfer data from one physical location to another (Laudon
and Laudon, 2001).
ICT products in use in the banking industry include Automated
Teller Machine (ATM), Smart cards, Telephone Banking, MICR,
Electronic Fund Transfer (EFT), Electronic Data Interchange,
Electronic Home banking. Several authors have conducted
investigations on the impact of ICT on the banking sector of
the Nigerian economy. Agboola et al (2002) discussed the
dimensions in which automation in the banking sector
manifest in Nigeria as follows:
1. Bankers’ Automated Clearing Services: This involves the
use of Magnetic Ink Character Reader (MICR) for cheque
43
processing. It is capable of encoding, reading and sorting
cheque.
2. Automated Payment systems: devices used here include
Automated Teller Machine (ATM), plastic cards and
electronic fund transfer (EFT)
3. Automated Delivery Channels: these include interactive
television and the internet.
Agboola (2001) studied the impact of computer automation on
the banking services in Lagos and discovered that electronic
banking has tremendously improved the services of some
banks to their customers in Lagos. The study was however
restricted to the commercial nerve centre of Nigeria and
concentrated only on six banks. He made a comparative
analysis between the old and new generation banks and
discovered variation in their rate of adoption of the automated
devices. Aragba-Akpore (1998) wrote on the application of
information technology in Nigerian banks and pointed out that
IT is becoming the backbone of banking services regeneration.
He cited the Diamond Integrated Banking Services (DIBS) of
Diamond Bank Limited and Electronic Smart Card Account
(ESCA) of All States Bank Limited as efforts geared towards 44
creating sophistication in the banking sector. Ovia, (2000)
discovered that banking in Nigeria has increasingly depended
on the deployment of information and communication
technology (ICT) and that IT budget for banking is by far larger
than that of any other industry in Nigeria. He contends that
on-line system has facilitated internet banking in Nigeria as
evidenced in some of them launching websites. He found also
that banks now offer customers the flexibility of operating
their accounts in any branch irrespective of which branch the
account is domiciled.
Woherem (1997) discovered that Nigerian banks since 1980s
have performed better in their investment profile and use of
ICT systems than the rest of the industrial sectors of the
economy. An analysis of the study carried out by African
Development Consulting Group Limited (ADCG) on IT diffusion
in Nigeria shows that banks have invested more on IT, absorb
more personnel, increase installed base for PCs, LANs and
WANs and installed a better linkage to the internet than other
sectors of the Nigerian economy. The study however pointed
out that while most of the banks in the West and other parts of
the world have at least one PC per staff, Nigerian banks are
45
lagging seriously behind, with only a PC per capita ratio of
0.18 (Woherem 2000). Some payments are now automated
and absolute volume of paper transactions have declined
under the impact of electronic transaction brought about by
the application of ICT to the payment system in Nigeria (David,
Frazer, 1985).
The adoption of ICT has influenced the content and quality of
banking operations. From all indications, ICT presents great
potential for business process re-engineering of Nigerian
banks. Investment in information and communication
technology (ICT) should form an important component in the
overall strategy of banking operators to ensure effective
performance. It is imperative for banks management to
intensify investment in ICT products in order to facilitate
speed, convenience and accurate services or lose out to their
competitors. The banking industry in Nigeria presents ICT
providers with great opportunities to market their innovations.
Success in this area however depends on how they can
customize their services to appreciate the ready minds of
various stakeholders in the industry.
46
3.2 TELE-COMMUNICATION AND ECONOMIC DEVELOPMENT
In the past, capital, labour and raw materials were regarded as
the critical ingredients for productivity. Today information
technology is not only regarded as the fourth factor of
production, it seems destined to progressively reduce the
relative significance of the first three, (Ras-work, 1995).
Through ICT, it is now possible for one country to provide
capital, but use the labour and raw materials of another
regardless of distance.
In order to survive in the highly competitive world of today, in
which countries and companies are struggling to acquire new
businesses and financial strength, either to maintain or
improve market share in the international and local business
milieu, it is important for them to wire up themselves in
readiness for the traffic of information technology that have
now become the fourth factor of production (Gates, 1995). For
countries to have worldwide connectivity, it is vital that they
set up the infrastructure that would facilitate inter and intra-
company communications. The free flow of information within
47
and between countries and organizations is critical to
competitive advantage.
Woherem, (1992) looked at factors that cause change and
concluded that telecommunication has become an agent of
change and that it is a major force ushering in the “global
village”. He also commented that it is a major contributor to
democratization of countries, deregulation of industries,
privatization, networking of groups and companies and the
development and distribution of information and ideas. He
went on by saying that while the rest of the world is being
daily connected through arteries of information and
communication channels using satellites, land and sea cables
and in the process sharing vast amount of data, Nigeria’s
rudimentary IT infrastructure and resources virtually excluded
her of this new revolution. Therefore, competitive wise, Nigeria
is not there yet. Since the 1980s, it has been increasingly
realized that telecommunication is not a luxury but a pre-
requisite for the rapid development of third world countries.
The internet is responsible for this realization. In the word of
Toffer, (1990), the internet has been growing exponentially
since early 1990s and now has an estimated 160 Million users
48
worldwide. It has become the fastest, cheapest and
increasingly the most preferred method of communication in
the developed world.
As pointed out earlier, telecommunication is powering the new
post-industrial information age; it is increasingly making
information a major ingredient in production. It is creating a
new type of world economy by making the small businesses as
powerful as the big one through access to and the use of
appropriate information technology. It provides the
infrastructure that every enterprise or country requires in
order to participate and compete in the new global economy.
According to Woherem, (1993), all organizations and
economies need the infrastructure in order to participate in
global interconnectivity of businesses and finance of every
kind. He explored the impact of ICT on integration and
concluded that in order for African companies to produce more
and increase their market share within and outside the
continent, they need to acquire ICT. Lack of appropriate ICT is
one reason Nigeria has not achieved its Millennium
Development Goals (MDGs) and regional integration. There is
need to communicate effectively with each other thereby 49
building the trust that will enhance trading, travels, tourism
and economic integration.
The relationship between ICT and economic development has
been a subject of many international studies (Ejo-Orisa, 1997,
Frenzel, 1996, Gates, 1995, Glastonbury, 1992, Naisbilt, 1994
and Woherem, 1995). Although findings of the studies differ in
the exact degree to which they assert that telecommunication
contribute to economic growth, their findings suggest a close
positive relationship between them. The studies show that
investment in telecommunications brings higher social and
economic rewards to low-income countries than high-income
countries at least in terms of benefits for every Dollar spent.
These findings should be taken very seriously by developing
countries like Nigeria in deciding the degree of priority placed
on telecommunications in its national development plans.
According to Maitland Commission Report, an improvement in
telecommunications in a country does not arise from economic
development; quite the contrary. Economic development is now
the function of the level of telecommunication infrastructure
possessed by a country. Naisbilt, (1994) reflecting on the
correlation between telecommunication and economic 50
development opined that along with privatization and
education, nothing can contribute more to a developing
country’s economic well-being than a state-of-the-art
telecommunication infrastructure.
Most of Nigeria’s roads are bad and do not promote fast and
safe communication. The postal system is epileptic, making it
frustrating for people to send and receive documentary
information from different parts of the country and the rest of
the world. There is an acute shortage of appropriate information
and database in Africa. Access to the internet would help
Nigeria to receive information from databases and information
systems, and promote intra-African information sharing, as well
as enable outsiders have appropriate information on the
country’s businesses, culture, people, successes and problems.
This may seem utopian, but it is seen to be the future direction
of trade and inter-organisational communication.
3.3 TELE-COMMUNICATION INFRASTRUCTURE IN NIGERIA: PROBLEMS AND PROSPECTS
As we dash into what Toffer (1990) calls terra incognita, that is
the next Millennium, how ready is Nigeria to participate in
that indistinct future; a future where electronic networks
51
would be domineering (Roth, 1998) Most of the business and
people in Nigeria want to be part of the emerging worldwide
information revolution. Nevertheless, the reality on ground is
that the country is not really prepared for the information
revolution of the 21st Century. It does not have the enabling
infrastructure, and it does not seem to be taking the
necessary action. The telecommunication infrastructure
needed to capture, store and transfer voice, text, numerical
and multi-media data is woefully short in Nigeria. The per
capita telephone line of the country is one of the lowest in the
world. Nigeria thus, needs urgent development of modern
telecommunication infrastructure in order to be able to
participate in most of the trades and discourses of the 21st
Century. Woherem, 2001) concluded Nigeria must modernize
its information technologies in order to achieve sustainable
development. Contributing to the same topic, O’ Reilly, (1997)
assert that for a country to benefit from ICT breakthroughs, it
must have efficient telecommunication infrastructure in place.
It has been observed that in Africa capacity building and policy
incentive is lacking, on the other hand it has been suggested
that the long-run growth witnessed by East Asian economies
52
has been a sustained increase in firm-level productivity
traceable to continuous build up of technological capability
(Biggs et al, 1995). Also, an analysis of Africa’s capacity
building problems and challenges has shown that the capacity
to manage in both private and public sectors is grossly
inadequate. The result is an ineffective public service reflected
in poorly-designed and managed infrastructures-telecoms,
roads, water, and sewage systems, etc (Thohlane, 1996). The
studies also showed that while most governments of Sub-
Saharan Africa sought to improve the situation through donor
technical assistance, this approach did little to improve the
efficiency or honesty of government substantially and has not
succeeded in building much management capacity within or
outside the governments. The approach only resulted in
replacing the indigenous African capacity and demoralizing
public administration (Bergi, 1993). What is needed according
to this observation is internalizing capacity building on which
to build in order to improve institutional and economic
development of the continent. Generally, technical assistance
has a role to play. It should focus on direct support of capacity
building and institutional development within a realizable time
53
frame, allowing efficient technical learning and absorption on
the part of the recipient (Labelle, 1995).
3.4 THEORETICAL FRAMEWORK
The positive externalities engendered by investment in
technologies have been analysed by the following endogenous
growth model.
3.5 ROMER’S MODEL OF TECHNOLOGICAL CHANGE
Romer’s model of technical change of 1990 highlights
sustained growth by assuming that technological change is
the unintended results of specializing firms’ investments. To
Romer, ideas are more important than natural resources. In
Romer’s model, new knowledge enters into production in three
ways. A new design is used in the intermediate goods sector
for the production of intermediate input. In the financial
sector, labour, human capital and available producer durables
to produce the final product. A new design increases the stock
of knowledge which increases the productivity of human
capital employed in research sector. This corroborates with
Galbraith’s assertion that, we now get the larger part of our
54
industrial growth, not from more capital investment, but from
investment in men brought about by improved men.
ASSUMPTIONS OF THE MODEL
- economic growth comes from technological change
- technological change is endogenous
- market incentives play an important role in making
technological change available to the economy
- invention of a new design requires a specified amount of
human capital
- the aggregate supply of human capital is fixed
- knowledge or a new design is assumed to be partially
excludable and retainable by the firm which invented the
new design
- technology is a non-rivalry input
- it is assumed that the low cost of using existing design
reduces the cost of creating new designs
Romer’s production function is given as:
∆A = F (KA, HA, A)
55
Where, ∆A is the increasing technology, KA is the amount of
capital invested in producing the new design (or technology),
HA is the amount human capital (labour) employed in Research
an Development (R &D) of the new design, A is the existing
technology of designs. F is the production function for
technology.
The above production function shows that technology is
endogenous when more human capital is employed for
Research & development (R & D) of new designs
The model suggests that, new knowledge (technology) is the
ultimate determinant of long-run growth which is determined
by investment in research technology. According to Romer, it
is spillovers from research efforts by a firm that leads to the
creation of new technology by other firms. In other words, new
research technology by a firm spills over instantly across the
entire economy. Also, a study by King and Robinson shows
that innovation in one sector of the economy has a contagion
or demonstration effect on the productivity of other sectors,
thereby leading to economic growth.
56
CHAPTER FOUR
RESEARCH METHODOLOGY AND EMPIRICAL ANALYSIS
4.1. INTRODUCTION
Information and communication sector is presumed to provide
new opportunities and frontiers across businesses, social,
economic and political settings. That is, the revolution that
accompanied the liberalization of the Nigerian
telecommunication sector provided new means of addressing
people’s basic needs and also enriching the lives of people
and businesses in unprecedented ways. It thus, implies that an
improvement in infrastructure and facilities of
telecommunications will have a considerable impact on the
banking sector. This chapter will focus on the trend analysis of
the impact of ICT on banking industry as well as the degree of
ICT influence on the sector. It is generally believed that the
use of ICT has re-shaped the competitive scenario of the
Nigerian banking industry.
4.2 IDENTIFICATION OF MAJOR INDICATORS (VARIABLES)
57
The indicators used to analyse major findings of this research
are mobile and fixed telephone lines, growth in loans and
advances of Intercontinental Bank Plc, growth in bank deposits
of Intercontinental Bank Plc, and growth in the bank’s
profitability (PAT). This is done in order to ascertain the
impacts of ICT on banking industry.
4.3 MODEL SPECIFICATION OF ICT & INTERCONTINENTAL BANK’S PERFORMANCE
The model above indicates that growth in ICT systems is
expected to lead to growth in Intercontinental Bank’s Loans &
Advances, Customers’ Deposits and Profitability.
4.4 ANALYSIS OF THE MODEL
58
FIXED TELEPHONE LINES
MOBILE PHONE LINES
LOANS & ADVANCES
CUSTOMER’S DEPOSITS
PROFIT BEFORE TAX
(PAT)
ICT
SY
STEM
S
BA
NK
S’
PER
FO
RM
AN
CE
IND
ICA
TO
RS
Due to constraints imposed by unavailability of secondary
data on ICT variables, the analysis was based on three
aspects:
a. A Comparative Analysis between the growth rate of fixed
telephone and mobile phone lines between 1995 and 2008
b. A Trend Analysis of the growth rate of Intercontinental Bank
Plc within the period of 2003-2008 with respect to growth in
ICT.
c. The actual effect of the volumes of fixed telephone and
mobile phone lines between 2003 and 2008 on the
performance of Intercontinental Bank Plc in terms of growth
in Loans and Advances, Customers’ Deposits and Profit
After Tax.
4.5 PRESENTATION OF DATA AND ANALYSIS
59
Table 4.51: Fixed/Mobile Phone Lines Subscribers
Before/After GSM Liberalization
Year Fixed Telephone Lines
% ∆ in Fixed telephone Lines
Mobile Lines
% ∆ in Mobile Lines
1995 405,073 - 13,000 -
1996 405,073 0.0% 13,000 0.0%
1997 415,400 2.5% 18,000 38.5%
1998 415,400 0.0% 18,000 0.0%
1999 473,316 13.9% 35,000 94.4%
2000 553,374 16.9% 35,000 0.0%
2001 600,321 8.5% 266,461 661.3%
2002 702,000 16.9% 1,569,050 488.8%
2003 850,000 21.1% 3,100,000 97.6%
2004 1,120,000 31.8% 9,200,000 196.8%
2005 1,223,258 9.2% 18,587,000
102.0%
2006 1,563,028 27.8% 32,325,785
73.9%
2007 1,579,664 1.1% 40,395,611
24.9%
2008 1,879,495 18.9% 57,608,877
42.6%
Source: National Communication Commission (NCC) & International Telecommunication Network (ITN)
60
Figure 4.51:
0
, ,10 000 000
, ,20 000 000
, ,30 000 000
, ,40 000 000
, ,50 000 000
, ,60 000 000
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Fixed Telephone Lines
Mobile Lines
From the above analysis in Table 4.51, the higher the number
of telephone lines (fixed & mobile), the more likely there will
be improvements on the banks’ performance. The figure
above highlights the poor state of telecommunication (ICT)
infrastructure in Nigeria before and after the advent of GSM.
For example, in 1995, a mere 405,073 fixed lines and 13,000
mobile lines were available, these grew to 600,321 in 2001,
representing a growth rate of 8.5% from 2000 after the
introduction of GSM. However, by the end of 2002, fixed
telephone lines and mobile phone lines had increased to
61
702,000 and 1,569,050 respectively. There was improvement
in banking services with the telecommunication sector
liberalization in 2001, both fixed and mobile lines increased
rapidly. Also, with fixed telephone lines of 1,579,664 and
mobile lines of 40,395,611 in 2007, it grew to 1,879,495 and
57,608,877 in 2008 corresponding to a growth of 18.9% and
42.6% respectively.
4.6 TREND ANALYSIS: GROWTH IN LOANS & ADVANCES OF INTERCONTINENTAL BANK PLC
Table 4.61
Year Loans & Advances Nm
% ∆ in
Growth
Fixed
Telephone Lines
% ∆ in fixed phone lines
Mobile
phone Lines
% ∆ in Mobile phone lines
2003 12,602 - 850,000 21.1% 3,100,000 97.6%
2004 21,653 71.8% 1,120,000 31.8% 9,200,000 196.8%
2005 52,598 142.9% 1,223,258 9.2% 18,587,000 102.0%
2006 161,357 206.8% 1,563,028 27.8% 32,325,785 73.9%
2007 262,536 62.7% 1,579,664 1.1% 40,395,611 24.9%
2008 435,457 65.9% 1,879,495 18.9% 57,608,877 42.6%
Source: Company Annuals; Stanbic IBTC Research & National Communication Commission (NCC) & International Telecommunication Network (ITN)
62
Figure 4.52:
Loans & Advances Nm
,12 602,21 653
,52 598
,161 357
,262 536
,435 457
0
,50 000
,100 000
,150 000
,200 000
,250 000
,300 000
,350 000
,400 000
,450 000
,500 000
2003 2004 2005 2006 2007 2008
Loans & Advances Nm
The advent of GSM in early 2000, with the banking industry
harnessing its full benefits in 2003 has engendered
competitive advantage to banks in terms of the number of
computers, the level of PC networks in use and the level of
telecommunication infrastructure. Hence, from table 4.61,
Intercontinental Bank’s Loans and Advances to customers
increased from 12,602 in 2003 to 21,653 in 2004, representing
a growth rate of 71.8%. Within the same period, the number
of fixed telephone lines and mobile phone lines increased from
850,000 and 3,100,000 in 2003 to 1,120,000 and 9,200,000 in 63
2004, corresponding to a growth rate of 31.8% and 196.8%.
whereas. Fixed and Mobile phone lines also increased from
1,579,664 and 40,395,611 in 2007 to 1,879,495 and
57,608,877; representing a growth rate of 18.9% and 42.6%
respectively. Within the same period, Intercontinental Bank’s
Loans & Advances increased from 262,536 in 2007 to 435,457
10 2008; this amounts to a growth rate of 65.9%. The bank’s
operating system was improved upon in order to achieve this
performance.
4.7 GROWTH IN DEPOSITS OF INTERCONTINENTAL BANK PLC
Table 4.71: Intercontinental Banks Total Deposits
Year Deposits (Nm)
% ∆ Deposits
Fixed
Telephone Lines
% ∆ Fixed phone lines
Mobile
phone Lines
% ∆ mobile phone lines
2003 35,584 - 850,000 21.1% 3,100,000 97.6%
2004 50,244 41.2% 1,120,000 31.8% 9,200,000 196.8%
2005 110,013 118.9% 1,223,258 9.2% 18,587,000 102.0%
2006 252,280 129.3% 1,563,028 27.8% 32,325,785 73.9%
2007 467,933 85.5% 1,579,664 1.1% 40,395,611 24.9%
2008 1,057,079 125.9% 1,879,495 18.9% 57,608,877 42.6%
Source: Company Annuals; Stanbic IBTC Research & National Communication Commission (NCC) & International Telecommunication Network (ITN)
64
Figure 4.71:
Deposits (Nm)
,35 584 ,50 244
,110 013
,252 280
,467 933
, ,1 057 079
0
,200 000
,400 000
,600 000
,800 000
, ,1 000 000
, ,1 200 000
2003 2004 2005 2006 2007 2008
Deposits (Nm)
In table 4.71, whereas the number of fixed telephone lines
increased from 850,000 in 2003 to 1,120,000 in 2004, a
growth rate of 31.8%%; mobile phone lines also increased
from 3,100,000 in 2003 to 9,200,000 in 2004; representing a
growth rate of 31.8% and 196.8% respectively, the deposit
base of Intercontinental Bank Plc increased from 35,584 in
2003 to 50,244 in 2004, growth rate of 41.2% % during the
same period under review. These performances were due to 65
flexible savings accounts operated with the best ICT available
manned by well-trained personnel. Again, the operating model
in Intercontinental Bank Plc is structured around the client.
Again, in 2008, Intercontinental Bank’s Deposits increased to
1,057,079 from 467,933 in 2007, this corresponds to a growth
rate of 125.9%. Within the same period, Fixed and mobile
telephone lines increased from 1,579,664 and 40,395,611 to
1,879,495 and 57,608,877 representing a growth rate of
18.9% and 42.6 respectively. This agrees with our initial
hypothesis that growth in Intercontinental Bank performance
is dependent on ICT.
4.8 GROWTH IN PROFIT AFTER TAX (PAT) OF INTERCONTINENTAL BANK PLC
Table 4.81: Intercontinental Banks Profit After Tax (PAT)
Year PAT (Nm)
% ∆ in PAT
Fixed
Telephone Lines
% ∆ in Fixed telephone lines
Mobile
phone Lines
% ∆ in mobile phone lines
2003 1,878 0.0% 850,000 21.1% 3,100,000 97.6%
2004 2,569 36.8% 1,120,000 31.8% 9,200,000 196.8%
2005 5,023 95.5% 1,223,258 9.2% 18,587,000 102.0%
2006 7,215 30.4% 1,563,028 27.8% 32,325,785 73.9%
2007 15,120 109.6% 1,579,664 1.1% 40,395,611 24.9%
2008 34,773 129.9% 1,879,495 18.9% 57,608,877 42.6%
Source: Company Annuals; Stanbic IBTC Research & National Communication Commission (NCC) & International Telecommunication Network (ITN)
66
Figure 4.71:
PAT (Nm)
,1 878,2 569
,5 023
,7 215
,15 120
,34 773
0
,5 000
,10 000
,15 000
,20 000
,25 000
,30 000
,35 000
,40 000
2003 2004 2005 2006 2007 2008
PAT (Nm)
Adoption of ICT has influenced the content and quality of
banking operations. From all indications, ICT presents great
potential for business process re-engineering of the Nigerian
banks. ICT enabled accurate records, enhances convenient
business hour, facilitates prompt and fair attention, and
promotes faster services and availability of home and office
banking services. Also, customers are happy with great
improvement on bank statement generation, account
reconciliation and balance enquiry. This factor brought about
increased performance and profitability to banks. From table 67
4.81 above, Intercontinental Bank’s profit after tax (PAT)
increased from 1,878 in 2003 to 2,569 in 2004. Likewise, in
2006, it was 7,215 and the highest PAT of 34,773 was attained
in 2008. This represents a growth rate of 129.9% from 2007
respectively. Also, fixed telephone and mobile phone lines
increased from 1,579,664 and 40,395,611 in 2007 to
1,879,495 and 57,608,877 in 2008 corresponding to a growth
rate of 18.9% and 42.6% respectively.
4.9 RESEARCH FINDINGS
This study revealed that the period between 1990 to 2008 was
characterized by fundamental changes in the content and
quality of banking business in Nigeria. Information and
Communication Technology (ICT) was identified as the main
driving force. The adoption of ICT directly affects how
managers decide, plan and what products and services are
offered to the banking public.
This study also revealed that Nigerians and Nigerian banks
have responded to this new revolution.
Intercontinental Bank Plc has witnessed tremendous changes
and performance linked with the developments of ICT over the
68
years. Although, the advent of GSM has increased
competitiveness in the banking industry, however, adequate
capacity is lacking as a result of inadequate
telecommunication infrastructure.
4.10 IMPLICATION OF FINDINGS
Although Information and Communication Technology (ICT)
has improved the speed and efficiency of banking operations
particularly routine banking transactions and the nature of
services provided to customers. However, ICT fraud has
become a major threat to the system. Security of information
was found to be very vulnerable in general.
For Nigerian banks to compete globally, given the rapid
globalization of businesses and commerce, there is need to
invest a lot more on ICT, both in terms of installed base,
staffing and training of IT staff.
The Nigerian government needs to look into the daunting
challenges facing the telecommunication sector. That is,
government should formulate ICT-friendly policies that would
provide enabling environment for ICT services to thrive.
CHAPTER FIVE
69
SUMMARY, CONCLUSION AND RECOMMENDATION
5.1 SUMMARY
In this research project, it has been fairly established that
computers and telecommunication systems have become very
important as delivery systems and productivity tools of
electronic data and information. The findings suggest that
Nigerian banks have invested more on ICT, have more IT
personnel, have more installed base per PC, LANs, WANs and a
better linkage to the internet than before. As a result of these,
ICT has influenced the content and quality of banking
operations especially with Intercontinental Bank Plc as
demonstrated in the analysis carried out.
However, the mere possession of ICT no longer confers any
special advantage; what distinguishes a leading bank from a
laggard one is the way and speed with which technology is
applied to deliver superior customer services. Banks need to
employ a lot of creativity and the appropriate compliments of
strategies, business processes, people and technology in a
sufficiently elastic manner in order to improve corporate
image, increase profitability, reduce costs while also pursuing 70
real growth. Moreover, another factor that may influence the
extent to which ICT enables productivity and growth is the
complementarity between ICT capital and skills.
Finally, it was also observed that, the greatest obstacle to
Nigerian banks from delivering world-class ICT services is the
poor state of the country’s telecommunication infrastructure.
5.2 CONCLUSION
The study has dealt with the impact of information and
communication technology (ICT) on the Nigerian banking
industry with special focus on Intercontinental Bank Plc. The
study revealed that ICT has had appreciable positive effects
on the banking profitability, customers’ patronage, service
delivery, customer services and general banking transactions.
These affect the growth of banking industry in Nigeria
positively because customers can now access their accounts
from any branch irrespective of where the account is
domiciled. Also, the introduction of ATMs has reduced the
volume of cash carried by customers.
71
It is also revealed that telephones, computer systems, LANs,
and Facsimile services are available in nearly all banks using
ICT in Nigeria.
Also, epileptic power supply and inadequate
telecommunication infrastructure were identified as the major
culprits in way of ICT adoption and utilization in Nigerian
banking industry. On this note, government should provide
enabling and supportive environment for ICT to thrive in
Nigerian banking industry.
5.3 RECOMMENDATIONS
It has been explicitly observed that the banking industry has
demonstrated a fair amount of competence in the application
of ICT; some banks were at the cutting edge of ICT and have a
clear vision of how ICT could be further applied successfully.
Banks have spent millions of Naira on ICT every year in a bid
to fully automate its operations and services to customers.
The industry recognizes that ICT was a major key to its
development.
72
In order to fully harness the increasingly returns and network
externalities of ICT, the banking industry needs to better apply
ICT to improve its operations, customer services and products.
Banks should devote more resources to development of
secure ICT systems, services and products. Also, the future
impact of outsourcing ICT procurement should be thoroughly
evaluated because the long term effect may be very
expensive.
The research also brought to light, the fact that ICT has
increased competition within the industry. The realization that
the market size is not really increasing has made banks more
competitive. Also, the expectation of their customers is very
high and in response, banks use ICT to satisfy the demand for
quality services and products. However, the business
environment has not been supportive; deregulation and re-
capitalization of the industry has even made their marketing
strategy become more aggressive. Finally, the poor state of
the nation’s telecommunication infrastructure should be
addressed.
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