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Effective communication links and computerized

system are a sine qua non for high quality service

delivery. With instantaneous access to information,

indentified shortage in markets are quickly

disseminated throughout a global network, thereby

ensuring efficiency, competitiveness, strengthening of

domestic services quality.

This agrees with Hanna (1994) who stipulated the

importance of information technology as follows:

1) It enhances access to global knowledge, markets

and capital.

2) It is critical tool for competition in an information

intensive economy.

3) It transforms the way people do things

4) It increase the amount of information available to

economic agents

5) It increase information intensity of processes,

occupations, institutions, products and economics

6) It reduces transaction and coordination costs

within and across institutions.

In this research work, the researcher will consider in

chapter one….the introduction of the study which will in

turn considers the following topics. The background of

the study, the statement of research problem, the

objective of the study, significance of the study, the

hypothesis and the structure of the work.

Chapter two focuses on the literature review, this

chapter is where the researcher extract materials from

various books, magazines, news papers and internet

resources. In chapter three, the researcher deals on

research methods while chapter four is data analysis

and presentation. The summary and findings are in

chapter five.

Title page - - - - - - - - - i

Certification - - - - - - - - ii

Dedication - - - - - - - - iii

Acknowledgement - - - - - - - iv

Abstract - - - - - - - - - vi

Table of content - - - - - - - viii


1.1 Background of the study - - - - - 1

1.2 Statement of the research problem - - - 14

1.3 Research objectives - - - - - - 20

1.4 Scope of the study - - - - - - 21

1.5 Significance of the study - - - - - 22

1.6 Research questions - - - - - - 23

1.7 Hypothesis - - - - - - - 24

1.8 Conceptual framework - - - - - 25

1.9 Theoretical framework - - - - - 35


2.1 Theoretical literature - - - - - 54

2.1.1The concept of information - - - - 54

2.1.2Types and applications of information - - 56

2.1.3The importance of information- - - - 58

2.2 Empirical literature - - - - - - 63

2.3 Summary of literature and value added - - 72


3.1 Research design - - - - - - 75

3.2 Population - - - - - - - 76

3.3 Sample - - - - - - - - 76

3.4 Data collection and instrumentation- - - 77

3.5 Validation of the instrument - - - - 78

3.6 Reliability of the instrument - - - - 79

3.7 Administration of the research instrument - 79



4.1 Introduction - - - - - - - 80

4.2 Presentation and analysis of data - - - 81

4.3 Testing the hypotheses - - - - - 83

4.4 Research findings - - - - - - 86


5.1 Summary - - - - - - - - 88

5.2 Conclusion - - - - - - - 89

Reference - - - - - - - - 91

Appendix - - - - - - - - 98



1.1 Background to the Study

The interface between technology, knowledge and

development in today's globalised world cannot be

overemphasize. presently there are four broad classed

of emerging technologies that are exerting deep

ongoing impact on industry, services and the society at

large. These are:

1. Information Communication Technology (ICT)

2. Biotechnology

3. New Materials and

4. Renewable energy technologies.(Kagbojola;

2005). Such technologies have impacts according to

Dos-Santos, Reffers and Mauer (1993 which could be

incremental (occurring continuously in the indutry

over a long time and at different rates often

associated with plant scale up, product and process

adjustments); radical (which are discontinuous events

which produce impulse for new markets), or change

agents of the techno -- economic paradigm (being at

the heart of Schumpeter's theory of long waves that

technological revolutions embody many clusters of

radical and incremental innovations which exert

pervasive effects on the economy to create new

technical and organizational modes).

Out of the emerging technologies, information

communication technology can be described as a new

techno-economic paradigm which has experienced the

most rapid development and taken the field of micro

electronics, informatics, data processing and

communications into areas of life which only a few

years ago were an exclusive preserve of space and

advance manufacturing systems. ((Kagbojola; 2005).

Its growing applications of robotics, media electronics,

optical fibers and digital networks are radical

technological innovations. The nature of response and

challenges of such technologies are equally

fundamental because generic technical innovations

alter the fundamental nature of product and processes.

It has influenced greatly information transmission

between and within organizations in multifarious


With respect to the banking sector, the utilization of

information communication technology has increased

attention from bankers and other financial services,

industry participants and policy makers. This is

partially due to the rapid and significant growth in

electronic commerce and the notion that electronic

banking and payments will likely advance more in

tandem with electronic commerce. In addition,

industry analysis's outlining the potential impact of

electronic banking on costs, savings, revenue growth

and increased customer convenience have also

generated considerable interest and speculation about

the impact of information communication technology

on the banking industry.

It is upon this premise that various scholars such as

Wilson (1993). Frei and Harker(1997). Freund, konig

and Roth (1997), Radeck, Wenninger and Orlow(1997),

James (1999). O'Sullivan (1998, 2000) and others

have been engaged in unending discourse on the

positive payoffs emanating from the utilization of

information technology in various enterprises. Such

academic debates have resulted in the birth of the

term information technology productivity paradox'

which is concerned with appraising the impact of

information technology on operational efficiency and

the productivity of organisations. A cursory look at the

industry level studies of the nineties such as the works

of Wilson (1993), Jordan, John and Katz(1999), Furst,

Lang and Nolle (1998) portray that in many instances a

positive correlation is posited between increased

investment in information technology and productivity.

On the contrary, other works, such as those of

Strassman (1990), Morrison and Berndt (1990), Dos-

Santos and other (1993) show that additional

investments in information technology does not

necessarily contribute positively to productivity. Such

works argue that the estimated marginal benefits are

less that the estimated marginal costs; hence there is

insignificant correlation between increased investment

in information technology and profitability measures,

Briynjolfsson and Hitt (1996) noted that most of such

results from researches account for what he referred to

as the economic theory of equilibrium'. This means

that increased profitability is not necessarily a by

product of increased spending in information


Some other researchers such as Loveman (1994),

Lichtenberg (1995) and others emphasize the need to

asses the differing impacts of information technology

utilization at the firm level. Loveman in his work

complied data from the Management Productivity and

Information database (MPIT). He discovered that the

utilization of information technology made no

significant impact to the out of manufacturing firms.

Lichtenberg in his work obtained his data from yearly

surveys conducted from the eighties to the nineties by

Computer world magazines. Using the Code Douglas

production function as his theoretical framework, he

estimated a positive correlation between increased

investment in information technology and the

productivity of firms. In addition, the International

data Group (IDG) usually compiles on a yearly basis,

details of expenditures made by firms on information

technology while the Standard and Poor's Compustat

11 database provides various measures of output and

non information communication technology expenses.

These two sets of data were analyzed by Brynjolfsson

and Hitt (1996). He made two interesting discoveries;

that information communication technology staff were

twice more productive than their non information

communication technology counterparts. In addition,

computer capital contributes over eighty percent

marginal increase in output whereas the contribution of

non information communication technology capital is as

low as six percent.

In spite of the differing views about the impact of

information communication technology, its revolution

in recent years aptly captured by the establishment

and access to global networking of information systems

has positively influenced time and space in the sending

and retrieving of information both within and across

diverse organizations, nations and regions. This

development has brought about drastic changes in the

way in which decisions are reached and policies

implemented. Countries and organizations with

electronic communication networks arising from

innovations in information communication technology

has made practicable on line access to a variety of

technical and non technical information, turning the

world into a virtual workplace. In facilitating the move

towards a more open and inclusive global system, the

global search for efficient and effective solutions to

pressing and often complex local, regional and global

problems. This is of course a key element in the global

quest for sustainable national and regional

development in developing countries.

The diffusion of information communication technology

innovations embodied in a vastly improved computing

and telecommunications capacity has generally been

weak especially in Sub-Saharan African countries.

However, a strong interest in its adoption to provide

information services has emerged in recent years in

the continent for two main reasons. First of all, the

revolution in information technology has resulted in

computer hardware becoming cheaper and more

readily available. Secondly, the value added or the

substantial utility of information communication

technology in the provision and access to information

services for improved planning and management has

become more widely recognized.

An overview of the global production and use of

information technology in Africa reveals that for over

thirty years, technological innovation has fueled

unprecedented advances in digital computing capability

in the fields of semi-conductor technology (the

foundation on which the information communication

industry is built), recording technology and

telecommunication capability (Frenzel; 1996).

Developing countries are following export led growth

examples of newly industrialized Asian economics by

becoming suppliers and investors of information

communication technology. However these

technologies have continued to be inaccessible to many

people in Africa. According to Mansel and Wehnll

(1980), though information communication technology

can be seen to attribute to economic growth, they also

introduce new challenges in Africa supporting the

notion that growth in its use is often thought of as a

cause of economic growth. Telecommunications

infrastructure is more broadly dispersed and developed

than other measures of information technology though

its diffusion is often compounded by problems of cost

allocation, geographic and climatic conditions,

procurement practices of operations, equipment design

and other architectural issues for several years.

However the convergence of computing and

telecommunications and the prevailing movement

towards regulation seems to have fostered an

increasing wave of mergers and alliances.

Infrastructure financing has also been one of the active

areas in international financing in recent years. For

example. IDRC has taken over the lead in financing

African electronics networking initiatives (Computers

and communication in Africa: 1994). Africa has started

shifting from state owned telecommunications

monopolies in the past decades to make way for

private sector participation. Nevertheless information

communication technology development in Africa is

poor compared to the rate of development in other

countries. According to ITU (1998) in the nineties

internet users in Africa is 1.3 percent while that of

America is 49 percent. Tele density for Africa is just

1.66 percent and international telephone traffic per

subscriber is over two hundred minutes per year but

overall traffic per inhabitant is less than one minute

probably due to growing debt burdens, high population

growth rate and civil disturbances.

In Nigeria, the adoption level of information technology

in the nineties in terms of availability and utilization is

at an average of 52 percent while the frequency of

utilization is about 56bpercent. (Vanguard; 1998).

According to the report, there are about seven

computers per one thousand persons in Nigeria. Which

indicates very low computer availability. Mansel and

Wehill (1998) used the footprint analysis' which refers

to infrastructure, experience, skills and knowledge

(INEXSK) to compute inter country index values for the

adoption of information communication technology.

The values they obtained are presented as follows in

Table 1.

Table 1: Index values on the diffusion of information

technology for selected countries.


Personal 68 0.38 60 74 60 147
Main lines 72 0.36 82 72 74 92
Internet 22 0 22 60 78 238
Television 101 5.5 95 90 100 127

Source: Mansel and Wehill (1998) Knowledge,

societies, information technology for sustainable


Table 1 shows very low index values for Nigeria

compared to other countries. This unsatisfactory state

of affaires according to ITU (1998) brought about a

greater desire for universal access to information

technology facilities in developing countries. Hence

within the past seven years, fiscal policies have been

used to encourage increased consumption of ICT

facilities in Nigeria. Unfortunately foreign exchange

restrictions have adversely affected technology inflow

and it availability. In addition, there is still low level of

computer spending per gross domestic product which

is estimated al less than 0.5 percent. The installation

of the global service mobile communication system and

greater private sector participation has helped to

improve the diffusion of information communication

technology in the Nigeria economy. This is based on

the fact that the substantial utility of information

communication technology in the provision of an

access to information services for improved planning

and management has become more widely recognized.

With respect to the banking sector (which is

fundamentally a service industry which thrives on a

series of informational transactions based on shared

concepts, procedures and relationships that enable

commodities and funds to flow within and among

regions), information communication technology

diffusion has taken place to a great extent. Many banks

are deviating from the use of manual record keeping

and transactions to micro banker training soft wares

and packages. This is based on the purview that with

increased competition, new electronic services are

likely to sharply accelerate the global retail financial

services by making delivery systems more efficient,

reducing prices and spreads, undermining geographic

and segment barriers and increasing customer value

and convenience. In line with the foregoing historical

developments, it becomes imperative to assess the

impact of information communication technology on

various sectors; in this instance the banking sector in

order to determine empirically the extent to which the

expected contributions from its adoption have been

realized in the Nigeria banking industry.

1.2 Statement of the Research Problem

The banking industry is one of the critical sectors of the

economy whose contributions to the pace and pattern

of economic development is well established. The neo-

classical production theory has identified capital and

labour among others as crucial factors, which

determine growth in output. The quality of labor

implicitly affects productivity and growth in output. In

relation to capital, the development of innovative

capacities is needed for its utilization, improvement

and sustainability, unfortunately changes in today's

modern world have shown that the abundance of

qualified labor and capital are no longer sufficient for

global competition. According to Hanna (1994),

information, flexibility and fast response are the keys

new factors and ICT plays a critical role in these areas.

According to her:

IT transforms the way people do things, increasing the

amount of information available to economic agents,

information intensity of processes, occupations,

institution, products and economies. It enhances

workings of markets, reduces transactions and co-

ordination costs within and across enterprises and

institutions. This is why the interface between

knowledge and technology in today's globalized world

cannot be overemphasized in achieving sustainable

development. In fact the distinction between

developed and developing nations according to the

United Nations Center for Science and Technology lies

in the access to information technology. African

countries are generally classified as underdeveloped

because of the relatively low level of their scientific and

technological development. Some of the commonly

expressed priorities of African countries, according to

Forje (1987) include inculcating a science and

technology tradition and consciousness in the society

and evolving technological potentialities. An assertion

at the 1982 Harare meeting of Ministers of Education is


'Science and Technology form the basis of

industrialization, the fact that they can be used as such

effective instruments and vehicles of development

means that the entire population must be associated

with scientific and technological advance.

This buttresses the fact that the importance of

information communication technology cuts across

sectors, Even in the educational sector, Obeka (1991)

has recommended information technology as an

effective tool for the reduction of instructional time

because it ignites student's interest and enhances their

understanding of subjects. Based on this realization,

the 1981 Nigerian Policy on Education and 1986

science and technology policy have emphasized science

and technology at all levels of education and the

provision of well equipped laboratories with information

communication technology equipment. Hanna, Guy

and Arnold (1995) noted that, the use of information

technology improved operational productivity of

Singapore Ports. With respect to the banking industry,

information technologies have improved internal

efficiency and inter-bank operations in Brazil and other

nations. (Frischtak 1993; Aiwenmobor, 1991; Ojo,

1991; Ekechi, 1990 and Unchendu; 1990).

A cursory look at Nigerian development plans and

target objectives of the banking sector reiterates the

need to strengthen and improve information

technology utilization in order to galvanize the nation

for development. The need is especially important to

reduce manual record keeping, banking time; grapple

with increasing challenges with inter bank operation

and global retail financial services with an attractive

diversified product mix. This is base on the premise

that banking is fundamentally a service industry based

on information in form of discounts, interest rate prices

and other information which enable customers make

implicit decisions about saving or spending. Hence the

growth of electronic commerce and banking and its

potential impact on cost, savings, revenue growth and

increased customers convenience has generated

considerable interest and speculation within the

present decade.

Beyond this revolution in the banking sector, there is a

critical problem. Put differently, how far has the

utilization of information communication technology in

the banking sector been able to achieve the objectives

guiding its acquisition. According to Hanna and Boyon

(1990), assessment of the impact of information

communication technology on sectors is in important

because there is insufficient empirical analysis of the

payoff of information technology utilization in

developing countries. kajobola (2004) also noted that

in Nigeria, though preliminary investigations reveal

that some organizations have adopted information

technology, there are no formal studies to determine

the level of adoption and impact on the efficiency of

such organizations and the consequent effect on the

Nigeria economic.

Hence after many years of the adoption of information

communication technology in the banking sector, it is

pertinent to evaluate its impact on their productivity,

profitability operational efficiency, capacity building

and employment structure. If significant impacts have

been made by utilizing information technology

facilities, there is need for policies to encourage both

the sustainability of such impacts and greater

investment in information technology gadgets.

Therefore the problem of this study is to determine

empirically the impact of the use of information

communication technology on the performance of the

Nigeria banking sector.

1.3 Research objectives

The general objective of this proposed study is to

assess the impact of information communication

technology on the Nigeria banking sector and formulate

strategies for policy reforms based on constraints

noticed at implementation levels.

Specifically, the study has been designed to

achieve the following:

1. To determine available information

communication technology facilities in Nigeria banks

and their level of adoption.

2. To determine the impact of information

communication technology on the efficiency of the

banking industry.

3. To determine the impact of information

communication technology on the productivity and

profitability of the Nigerian banks.

4. To determine the impact of information

communication technology on employment structure

and staff development in Nigeria banks.

5. To offer policy recommendation for more effective

adoption of information in Nigeria banks.

1.4 Scope of the Study

The scope of this study is restricted to banks that

have been in existence for at least seven years.

This scope is chosen because such banks have a

history of pre and post information technology

adoption experiences, which the study is

structured to capture. The scope of the study will

also focus on evaluating the impact of information

communication technology adoption with respect

to profitability, productivity, operational efficiency,

capacity building of staff and employment

structure in Nigerian banks.

1.5 Significance of the study.

The importance of banking sector in natural

development and life cannot be overestimated. It

does not require much effort to discern that success in

achieving the laudable objectives of this sector

depends on her ability to adopt a firm of technology

which will contribute effectively to its productivity,

competitiveness, profitability and efficiency.

Information communication technology is an

instrument par excellence in providing the banking

sector with a backing for greater effectiveness. Hence

this study will be of much importance to manufacturers

of ICT product, bankers and policy makers. First of all,

this study will provide empirical information as to the

notable impacts of ICT in the Nigerian banking sector

which is seemingly lacking in current researches. It

will enable bankers and others firms to increase

investments in ICT facilities based on noticeable

payoffs. Policy makers on the other hand will better

equipped to modify laws concerning ICT importation.

manufacturing and adoption in order to encourage

greater utilization by sectors.

1.6 Research Questions

The following research questions are formulated to

guide the study:

1. What are the available information communication

technology facilities in Nigeria banks and their

level of adoption?

2. What is the impact of information communication

technology utilization on the efficiency of the

banking industry?

3. What is the impact of information communication

technology on the productivity and profitability

of Nigerian banks?

4. What is the impact of information communication

technology on employment structure and staff

development in Nigeria banks?

1.7 Hypothesis (p<0.05)

The following null hypotheses are formulated to guide

the study:

HO1: There is no significant difference in the

productivity of Nigerian banks pre and post adoption

of information communication technology.

HO2: There is no significant difference in the

profitability of Nigeria banks pre and post adoption of

information communication technology.

1.8 Conceptual Framework

The framework adopted in this proposed research

follows a synthesis of the works of Hanna (1995, 1994

and 1990),Barnett (1993), Forje (1987) and others.

The concept of technology stands at the center of

many critical issues facing the development of any

society. However, many people tend to associate

technology with products and techniques (or hardware)

and this association may be particularly prevalent in

developing countries. Nevertheless, Barnett (1993)

stated that technology may be broken into at least four

components namely:

Technique- The specific configuration of machines

and equipment required to Produce a good or service

(often regarded as hardware) Knowledge-Comprising

Knowledge of science and technology, skills,

experience, Know-how and attitudes (often regarded

as software) Organization- The institutional

arrangements by which the technique and knowledge

Are combined, and the means by which they are

managed; Product- The good or service resulting from

all the above.

Technology includes all software applied in the

production of goods and services. This covers all skills,

knowledge. Processes and methods used to carry out

man's activities. Hence, technology in the context of

the above is taken to stand for those practices,

techniques and inputs whose resources requirements is

locally available and meet the needs of the user on a

sustainable basis. According to Forje (1987),

technology is an instrument of socio-economic

development meant to strengthen endogenous

scientific and technological capacity. These objectives

are the same with the objectives behind the

introduction of information communication technology

in the banking sector. Hence technology is

conceptualized as an instrument which can be used to

improve banking performance.

Information is perceived as facts, data, news and

knowledge. It is a symbol of political potency and

economic prosperity, carrying implications for

relationships between nations. Hence information is

conceptualized as data processed in useful form. it can

be delivered orally, visually, as data, text or through


Information technology on the other hand, is the

acquisition, processing, storage, dissemination and use

of vocal, pictorial, textual and numerical information by

a microelectronics based combination of computing and

telecommunications, Its various types are the compact

disc, Read-Only Memory (CD ROM). Computer

networks, Desktop publishing, Expert system,

Geographic information systems, Interactive Video disc

(IVD) Packed radio, Radio and interactive Radio,

Video cassettes, satellite communications and such

like. Its softwares are multifarious ranging from

Microsoft word, Spreadsheets (such as Lotus excel

etc.). Data base Management systems. Statistical

packages (for example SPSS, SAS etc), User written

programs, Fault Diagnosers, Micro banker, Oracle,

Insurance accounting etc. These can be used for data

analysis, information processing, storage and retrieval

of data, information dissemination, CD ROM searches,

peer review groups teleconferencing general

management, forecasting, graphics/education

modeling, simulation and such like. It is essentially the

product of advances in three key areas of computing,

telecommunications and microelectronics.

Computing in this instance is conceived as a

conglomeration of electronic and other devices that

perform prescribed operations on coded data. It

consists of hardware and software.

Telecommunications is the exploitation of technologies

to create a worldwide communication infrastructure,

which transmits not just voice but text, data and

image, Microelectronics comprises core-enabling

technologies, which enable computers and

telecommunications to work. Hence IT spans a

definitional spectrum that includes microprocessors.

cable access television, fiber optics, satellites, teletex,

word processing electronic mail, video, robotics, etc.

the basic expected linkages existing in the utilization of

information communication technology in the Nigerian

banking sector is conceptualized as shown in Figure1

Productivity as a concept involves the transformation

of resources into final goods and services. The

relationship between inputs and output is a

technological relationship which economists summarize

in a production function. Production is the creation of

wealth which adds to welfare. It is a vital link in the

process of satisfying unlimited wants subject to

available resources. It is measured by comparing the

amount produced with time taken or resources used to

produce it. Production function involves and can

provide measurements of marginal productivity of

factors of production, marginal rate of substitution and

elasticity of substitution, factor intensity, efficiency,

efficiency of production and returns to scale. The basic

theory of productivity usually concentrates on the

range of output over which the marginal product of

factors although positive, decrease or over the range of

diminishing (but non negative) productivity of factors

of production. Alternatively, productivity. theory

concentrates on levels of employment of the factors

over which their marginal products are positive but

decreasing. According to koutsoyiannis (1979), its laws

describe the technically possible ways of increasing the

level of output.

The concept of efficiency on the other hand seeks to

produce improvements in statuesque and satisfactory

results with minimal wastages. This takes place when

changes in the organization of production and

distribution are beneficial an contributes positively to

social welfare. With respect to production, efficiency

occurs when an economy is employing all its factors of

production in efficient combinations so that it operates

within its production possibility frontier. With respect

to exchange, efficiency occurs when it is possible to

redistribute a given stock of goods and services in such

a way that it benefits someone else without harming

another. This is similar to the concept of efficiency in

output mix. In line with the foregoing, Efficiency in the

banking sector is conceptualized as having practical

indices such as diversified product mix, positive

improvements in employment structure and service

delivery time for things like bank transfers, clearing of

cheques, checking of bank balances, production of

bank statements and such like.

Staff development or capacity building of manpower

with respect to the adoption of information

communication technology as a wide terms, is

conceptualized as the specific activities and

mechanisms by which technological capacities is

acquired. This includes formal training and non-formal

training programs for capacity building of manpower.

formal here is used to provide the foundation of other

forms of learning activities or programs. The merger of

technological learning and adaptation produces

capacity building of labor at the end of the continuum.

Profitability on the other hand, is a major goal of any

firm or industry. It is the ultimate output of a

company; the difference between the total revenues

and expenditures. It is a conceptually sound method

of appraising investment projects for it gives due

consideration to the time value of money. Calculation

of profitability helps firms solve the problem of

choosing among alternative projects provides a means

for distinguishing between acceptable and

unacceptable project, provides a ranking of projects in

order of desirability and acts as a criterion which is

applicable to any conceivable investment. It can be

determined through traditional approaches such as the

payback period or accounting rate of return or through

the discounted cash flow criteria which indicates the

use of the net present value, internal rate of return or

benefit cost ratio. In fact because of the utmost

importance of the capital budgeting decision, it is

imperative to measure the economic worth of such

investment project through its profitability. With

respect to the banking sector, profitability analysis is

conceptualized as determining earning per share

(dividing earnings after in interest and taxes by

outstanding common shares) or return on equity

(dividing earnings after in interest and taxes by share

capital plus reserve and surpluses) or return on assets

(net profit divided by total asset) and so on.

Nigerian Banking sector prior to


Little exposure to information communication



Manual handling of large volume of transactions

Delays in
Long Restricted Confirmatio Long
Customer Interbank n banking
queues operations Of balances, time
clearing of
and other

Increase customers inconveniences, low operational

efficiency and high cost of production.

Need for adoption of information communication technology

in Nigerian

Increased Increased
Diversified Faster
Capacity of profitabilit
Product service
building of y and
mix Delivery to
staff and productivit
positive y
changes in
structure of

Increase in operational efficiency of Nigerian Banks

Fig 1: A flow chart showing the expected impact
information communication technology in the
banking sector

1.8: Theoretical Framework

The role of technology in any sector may be

exaggerated or underestimated. According to Oscamp

and Spacapan (1992), technology is probably the most

dominant influence on life in the modern world.

According to KIkup and Keller(1992), technology

torches every aspect of our lives, coping with all needs

in a practical way. Other researchers such as Inkster

(1991), Bauchi (1990), have all noted that technology

is an instrument for socio-economic development. The

utilization of present day technology is the

distinguishing factor between human species in today's

contemporary society.

Of all the technologies of our time, information

technology has the greatest influence at the

international arena. According to Hanna, Boyson and

Gunaratne (1996), 'as some economic historians would

assert, the pervasiveness of information technology or

society amounts to a second industrial revolution. It is

an enabling technology for quality enhancement.

various models have been propounded on how to

measure the impact of information technology on

economic sectors. A synthesis of the works of Chief

Information Officer (1992) and Strassman (1990) show

that the impact of IT on sectors could be assessed

through the following models:

(a). Balanced Score Card Model: Under this

method, four inter related operational and

financial measures are used. These measures

center on customer's view of organizational

performance, line manager's view of internal

processes, strategic manager's view of innovation

effects and the shareholders view of financial


(b). Information Economics Model: Relative

weights are assigned to tangible and intangible

corporate objectives. IT systems are scored

based on their impacts on each of the objectives.

The final step is a peer review process to evaluate

the scoring of errors and oversight.

(c). Impact Focus Strategy Model: This approach

relies on the listing of benefits anticipated by an

organization at onset of system's implementation.

It also involves the creation of benchmarks, which

the system must meet to have an impact.

(d). The Value Framework Model: This method

uses a grid to define multiple impacts of an

information system based on two dimensions

namely impact and value. The value dimension

includes additional service/product quality cost by

technology. The impact dimension included time

compression of processes, overcoming geographic

restrictions and restructuring business


(e). Alternative Payoff Scenarios Model: The

value of information technology investment is

calculated by determining how the value of

generated information leads to payoff. This

payoff is compared with the payoff without

information technology by quantifying impacts in

non monetary terms, quantifying monetary

benefits from associated improvements. These

net profit effects are compared with expected net

profits from changed decisions and processes

without information technology.

(f). The Return on Management Model (ROM):

Information technology here is regarded as a tool

primarily to improve managerial performance.

management outputs and inputs are compared at

a ratio at management value added; the lower the

ratio, the lower the ROM and vice versa.

(g). Embedded Network Productivity

Measurement Model: This approach predefines

measurement parameters, which are built into

network management software, and real time

indices of compliance with performance targets

are generated.

The framework adopted for this study is the impact

focus strategy model propounded by the Systems

Research Center, Boston University. The model relies

on the listing of benefits anticipated by an organization

at onset of systems implementation. Benchmarks,

which the system must meet in order to have an

impact, are also created. the benefits anticipated in

this instance are improved operational efficiency,

productivity and profitability of the banking sector.

Hence as this study proposes to determine the extent

to which the use of information communication

technology have impacted on these afore-mentioned

benefits, the impact focus strategy model is deemed

best suited above other models for such a kind of


In order to empirically determine the returns from

investments in information communication technology

by sectors, the most widely used methodology is the

production theoretical framework (Loveman; 1994,

Lichenberg; 1995 and Baba and Parker, 1997).

According to Parsons, Gotlieb and Danny (1993), in the

absence of measures of actual benefits associated with

information communication technology (ICT), it is not

possible to perform cost benefit analysis of ICT

investments and thus production functions which relate

to ICT spending to overall productivity or output

measures are seen as the best alternatives. Berdnt

(1994) noted that production function techniques are

quite good and reliable. Loveman (1994) and

Lichtenberg (1995) noted that many studies on

impacts of ICT on productivity use Cobb Douglas

production function for their empirical analysis.

According to Prasad and Harker (1997), the choice of

the form of production function is constrained by

economic theory which requires that conditions such as

monotonicity and quasi concavity be satisfied. However

Berndt (1991) noted that one of the simplest most

prove production functions for decades which satisfies

such condition is the Cobb Douglas production function

theory which states that

Q = Q = Ala1 Ka2 Ma3

Where Q is the output rate; L is the quantity of labor;

K is the quantity of capital; M is the quantity of raw

materials and A, a1, a2 a3 are the associated output

elasticity parameters that vary from case to case. It is

of course true that in the estimation of the Cobb

Douglas production function, a relatively high

correlation may be expected between the independent

variables. Nevertheless Kennedy (1985) noted that

the existence in which the researcher is set does not

necessarily mean that the coefficient estimates in

which the researcher is interested in have unacceptably

high variances. Most studies on assessment of the

impact of information communication technology on

productivity have used this model and obtained reliable

estimates. Some of such works are those of Loveman

(1994), Lichtenberg (1995), Brynjolfsson and Hitt

(1996) and others.

While production functions have been used by various

studies in the past, it is imperative to mention that

production function approaches, addresses both

impacts on productivity and profitability. With respect

to productivity, an impact analysis of ICT investments

make positive contributions to output after deductions

for depreciation and labor expenses have made. On

the other hand, profitability studies are concerned with

whether ICT investments contribute to profits of the

firm or its stock market value.

The major problem of productivity studies with respect

to the banking sector is on the issue of what

constitutes the output of a bank since ICT investments

must make positive contribution to output for it to have

an acceptance impact. According to Berger and

Humphrey (1992) there are various approaches for

evaluating the output of banks which may be classified

into three namely; the asset approach, the user cost

approach and the value added approach.

According to Baba and Parker (1997), the asset

regards banks as financial intermediaries between

borrowers and depositors. In this approach, loans and

other assets are regarded as bank output while

depositors and other liabilities which provide the

finance and equip banks with the capacity to 'sell'

finance are regarded as bank inputs. Mester (1987)

noted that under this approach inputs refer to labor,

capital and deposits while bank outputs are the dollar

value of the earning assets of the firm. Triplett (1992)

however criticized this by saying that it fails to

recognize the services a bank provides to depositors in

return for the finance they provide to it.

The user cost approach on the other hand focuses on

the net contribution of each of the financial products to

the banks revenue. It assumes that if assets financial

returns are more than its opportunity cost, it becomes

an output as does a liability whose financial cost are

less than its opportunity cost. The assets and liabilities

which fail to satisfy these conditions become inputs.

Hancock (1991) utilized this approach where regarded

loans as banks output with demand deposits and time

deposits as inputs. This approach however is not free

from problems. According to Berger and Humphrey

(1992) it is difficult, if not virtually impossible to

measure and unambiguously apportion financial

returns and opportunity costs among the various

financial products of a bank.

The value added approach according to Baba and

Parker (1997) or the activity approach studies all

assets and liabilities as having some output

characteristics without grouping them into output or

input exclusively. Benston, Hanweck and Humphrey

(1982) posited that output should be measured in

terms of what banks do that cause operating expenses

to be incurred. In line with Berger and Humphrey

(1992) argued that the value added for each financial

measures of the bank should be determined on the

basis of operating costs and those that have significant

value added should be considered as the outputs of the


Another measure that is often considered

representative of a bank's output and one that is

relevant to this proposed study is based on the works

of Lichtenberg (1995) and Bryjolfolsson and Hitt

(1996). Revenue is regarded as output of the few

banks they studied. Unfortunately econometric studies

of the banking industry do not use revenues as an

output measure. This is because revenues are often

both inputs and output for example in the case of

interest and fees derived from loans can be considered

as output, but often borrowers are required to hold idle

deposits as a condition for loans and such deposits give

rise to implicit revenues. Hence this makes revenues

an unreliable guide for determining outputs (Berger

and Humphrey; 1992).

Acc to Baba and Parker (1997), with respect to the

issue of profitability, several studies in competitive

strategy have posted that the competitive environment

in which firms operate have significant effects on the

returns from ICT investments. Porter (1980) noted

that in a free competitive market, firms cannot gain

sustainable competitive advantage from technologies

that are available to all. It is only when a technology

creates significant barriers to entry that it becomes

profitable to invest in it. Hence ICT that is freely

available to all firms according to him does not provide

any sustainable competitive advantage to the firm in

such an environment. Clemons 919910 posited that

ICT investment is more of a strategic necessity rather

than a provider of competitive advantage. Thus, the

firms investment in ICT should not be associated with

supra normal profits. This gave rise to the profitability

oriented hypothesis suggested by Bryjolffosson and

Hitt (1996) which states that ICT investment make

zero contribution to profits or stock market values of

the firm.

In spite of these varying dissenting views, theoretically

profitability can be calculated in relation to sales or to

investment. Each company should be able to produce

adequate profit on each item of sales. If sales do not

generate sufficient profits, it would be very difficult for

the firm to cover operating expenses and interest

charges and as a result, will fail to earn any profit for

owners. The profitability of a firm can also be

evaluated in terms of firm's investment in assets and in

terms of capital contributed by creditors and owners.

If such a firm is unable to earn a satisfactory return on

investment, its survival is threatened. The following

approaches can be used to determine a firm's

profitability according to Pendey (1981)

a) GROSS PROFIT MARGIN: This profitability ratio

in relation to sales is determined by dividing the gross

profit by sales. This will reflect the efficiency

with which the management produce each unit of

product. The ratio also indicates the average spread

between cost of goods sold and the sales revenues.

b) NET PROFIT MARGIN: This is obtained when

operating expenses and income tax are

subtracted from the gross profit. The net profit

margin ratio is measured by dividing net profit

after tax by sales. This ratio indicates the firm's

capacity to withstand adverse economic

conditions; it establishes a relationship between

net profit and sales and indicates management's

efficiency in manufacturing, administering and

selling the products, It is the overall measure of

the firm's ability to turn each items of sales into

net profit in order to achieve a satisfactory return

on owner's equity.


investment here refers to total assets, capital

employed or the owner's equity. Accordingly,

many profitability ratios in relation to investment

can be calculated such as:-

i) Return on Assets: The return on assets or profit

to assets ratio is net profit divided by total

assets. This excludes interest charges from the

net profit figure. However, in order to arrive at

real earnings, the interest charges are included in

the net profit after taxes such that return on

assets is net profit after taxes plus interest

divided by total assets. Sometimes a further

modification is introduced. The intangible assets

are excluded from total assets such that it is

calculated as net profit after taxes plus interest

divided by total tangible assets. This measure

evaluates the use of total funds without any

regard to its source. It also evaluates the

performance of division in the multi-divisional


ii) Return on capital employed: Capital in this

instance includes permanent capital (non current

liabilities plus shareholders equity) Alternatively,

it is equal to working capital plus non current

assets. As with total assets, there are three

variations of the return on capital employed

given as:-

• Net profit after taxes divided by capital employed


• Net profit after taxes plus interest divided by

capital employed or

• Net profit after taxes plus interest divided by

capital employed less intangible assets.

This measure indicates how well the management

has used the funds supplied by owners and


iii) Return on shareholders equity; This is sometimes

called the net worth which includes common share

capital, preference share capital, premium and

reserves and surpluses less accounted losses. It

can be calculated by dividing net after taxes by

shareholders equity. This ratio reveals the relative

performance and strength of the company in

attracting future investments. The other measures

for calculation of profitability are as follows:-

d) EARNINGS PER SHARE: This is obtained by

dividing the net profit after taxes less preference

dividend by the total number of common shares

outstanding. This reveals the profitability of the

firm on a per share basis but not how much is

paid as dividend or retained in the business.

e) DIVIDENDS PER SHARES: This is obtained by

dividing earnings paid to shareholders and number

of common shared outstanding.

f) DIVIDEND PAYOUT RATIO: This is the dividend

per share or total dividend divided by the earnings

per share.


dividend yield is the dividend per share divided by

the market value per share while he earnings

yield is the earnings per share divided by the

market value per share. These evaluate the

shareholders return in relation to the market

value of the share.

h) PRICE EARNINGS RATIO: The reciprocal of the

earnings yield is called the price earnings ratio

which is obtained as the market value per share

divided by earning per share. This is widely used

by security analysts to evaluate a firm's

performance as expected by investors. It reflects

investor's expectations about the growth in the

firm's earnings.

With respect to the theoretical framework for the

determination of changes in productivity in this

proposed study, the sum of total loans and

deposits for each year will be regarded as the

representation of output. The analysis will be

repeated with the net income of the bank or

revenues accruing to the bank. In the case of

profitability, the main two measures used by

banks as indicators of profitability are the return

on assets (ROA) and the return on equity where

ROA is the net income as a percentage of total

assets indicating how well a bank has utilized its

assets which is the theoretical framework selected

to guide this study. The ROE is the net income as

a percentage of total shareholders equity

measuring how well bank equity has been




Various literatures are reviewed to guide the study.

These are subsumed under headings such as

theoretical literature, empirical literature, summary of

literatures review and value added.

2.1 Theoretical literature

This section consists of the concept of information

communication technology, types, applications and

importance of information technology.

2.1.1 The concept of information communication

technology (ICT) in the emerging electronics complex

industrial sector, information communication

technology forms part of a constellation of industries

which consist of various sub groups such as semi

conductors, computer components,

telecommunications, consumer electronic and office

devices. It is the product of advances in key areas of

computing, telecommunications and microelectronics.

(Martin; 1988). Zijp (1994) described it as

telecommunications and computer-based technology.

According to Hanna (1994). information

communication technology covers all activities and

technologies which involves the handling of information

by electronic means. This includes information

acquisition, storage, retrieval, processing, transmission

and control. According to her, it includes the supply

side (which deals with computer hardware and

software, telecommunications equipment and micro

electronics) and the demand side (which includes

applications of information technology of all sectors

including financial. manufacturing, education,

transaction system. management information

systems, electronic publishing and information

services). hence information communication

technology refers to the acquisition, processing,

storage, dissemination and use of vocal, pictorial ,

textual and numerical information by a

microelectronics based combination of computing and


2.1.2 Types and applications of information

communication technology

There are multifarious types of information technology

with extensive applications in various sectors. Some of

the commonest types are as follows:

i) Compact disc read only memory (CD ROM): This

requires a micro computer with a CD ROM drive,

discs and electricity. It is basically used as a reference


ii) Computer Networks: This refers to computers at

different location linked to modern and to

telecommunications networks. It is basically used

to link locations with typed messages and link users to

sources of data.

iii) Desktop Publishing: This makes use of

microcomputers, Laser printer, software and

electricity for the production of high quality

texts and graphics.

iv) Expert systems; This consists of the use of micro

computer with expert system software and electricity.

It is used for training and provision of expert

advice to less experienced users.

v) Geographic information system (GIS): this types of

information technology uses micro computer, ink jet

printers or equivalent, GIS software, digitizing tablet

and electricity. Its applications are for data

organization and comparisons on geographic areas and

for land use planning and environmental impact


vi) Interactive video disc (IVD): This is used mainly for

pictorial and verbal communication. Its involves a

combination of a micro computer with internal video

board linked to video disc player and speaker.

vii) Packet radio: It utilizes a micro computer, radio with

modern antenna and access to satellite link for link

groups with poor communication to others

viii) Radio and interactive radio: This requires the use of

radio, radio broadcasting station, broadcast materials

for mass communication and training purposes.

ix) Video technology: This makes use Video camera and

tapes, editing equipment, projectors and television to

enables small groups produce powerful visual


x) Satellite communication: This consists of a satellite

dish for low orbiting satellite (LEOS) and for

geostationary orbiting satellite (GEOS). It uses a

satellite channel, user terminal and electricity for

access to television broadcasts, distance education,

remote sensing transmission of video pictures, life

events, texts, graphics, etc.

2.1.3 The importance of information communication

technology. We are currently in the information age.

According to the United Nations Center for S&T, the

distinction between information have and the basis for

the dichotomies between developed and developing,

rich and poor; it is within this context that the concept

of development might be understood in information

terms. A synthesis of the works or Wellenius (1992)

and Hanna (1991) shows that IT accounts for a great

percentage of GNP. In the United States of America,

more than 46% of GNP and 53% of labor income are

related to knowledge, information and communication.

In many other countries such as countries within the

organization for economic co-operation and

development (OECD), the information sector accounts

for between one third to half of Gross Domestic

Product (GDP) and employment Wellenius (1992)

noted that by the year 2000 this sector is expected to

grow the 60% of the European community GDP.

The information sector is taking up such a large

percentage of GDP because the abundance of cheap

labor and raw material is no longer adequate for global

competition. According to Hanna (1994) information,

flexibility, product quality and fast response are the

key new factors required and IT plays a critical role in

these areas. Anotholt (1993) has declared that

information is just as important as a production factor

like lank, labor and capital. Adeola (1995) has

commended on the implications of the new General

Agreement on Trade and Tariffs (GATT) - the product

of Uruguay round of multilateral trade negotiations.

According to her:

Effective communication links and computerized

system are a sine qua non for high quality service

delivery. With instantaneous access to information,

indentified shortage in markets are quickly

disseminated throughout a global network, thereby

ensuring efficiency, competitiveness, strengthening of

domestic services quality.

This agrees with Hanna (1994) who stipulated the

importance of information technology as follows:

1) It enhances access to global knowledge, markets

and capital.

2) It is critical tool for competition in an information

intensive economy.

3) It transforms the way people do things

4) It increase the amount of information available to

economic agents

5) It increase information intensity of processes,

occupations, institutions, products and economics

6) It reduces transaction and coordination costs

within and across institutions.

Onwuka (1981) in his work stipulated that the use of

information communication technology is advantages

because it develops a continuity of thoughts especially

for motion pictures. It also stimulates self activity for

pupils through the provision of realities of experience,

makes learning more permanent and kindles student's

interest in subjects. It also supplies meaningless word

responses by pupils. Martin (1988) noted that

information is the life blood of any form of education.

according to him, any problems cause by an

exponential growth in information are offset by the

benefits of information communication technology to

educational development. Such benefits refer to

marked increase in the amount of information

learning and enhancing of understanding. The essential

significance of information communication technology

lies in the role as a change agent, creator of

possibilities: and an enabling and liberating presence in

our midst which changes the relationship between

learning and leisure.(Martin: 1988). According to craig

(1984): "although it will be some time before the full

potential of ICT is realized, the advantages are

apparent and include exposure to new ideas,

experiences, development of logical thinking and

reasoning abilities, support for training in new skills

such as programming remedial activity and stimulation

of real life situations."

In summary, information communication technology is

profoundly transforming competitive strategies,

product development, manufacturing processes and

procurement practices. It is upon this premise that

Martin (1988) stated emphatically that, "no important

field of endeavor remains immune to the influence of

information technology and no corner of life its left

undisturbed at its short coming." The transformations

achieved by information communication technology

according to Hanna (1994) induces managerial and

organizational innovations, new businesses practices

such as sourcing, de-layering, time based competition,

just in time procurement and flexible manufacturing.

According to Gbade (1990) and Antonello (1990)

information communication technolo1gy is an enabling

technology, which blends traditional industrial

structures, based on small firms with trends towards

quality enhancement. This is because the success and

efficiency of firms surely depends on timely access to


2.2 Empirical Literature

Various empirical studies on information technology

and its impact on sectors in various countries have

been conducted over the years. Strassman (1990)

studied the statistical correlation between ICT spending

and profitability or stock value. He discovered that the

correlation between these two factors was insignificant

which implies that ICT spending is unproductive.

Morrison and Bernt (1991) compared the marginal

benefits of investment in information communication

technology with the marginal costs for the

manufacturing industry. They discovered that for each

additional dollar spent in information technology

equipment, the marginal increase in measured output

was only eighty cents.

Tan, Luv and Loh cited in Hanna, Guy and Arnold

(1995) studied the impact of ICT in Singapore ports.

They noticed a significant increase in the operational

productivity of the ports. Frischtak (1992) looked at

the linkages between ICT used in banks and

productivity change in Brazil. Mckendrik (1992) on the

other hand looked at the impact of ICT on Indonesian

commercial banks. The results obtained showed that

Brazilian banks have benefited from the use of

computers systems. Unfortunately the use of ICT has

not had any significant impact on the financial

performance of banks in Indonesia. Mody, Suri and

Sanders (1992) looked at the impact of ICT at low

wage levels. Their results portrayed that at low wage

levels, ICT has significant impact provided

organizational prerequisites are put in place.

McFarland cited in Hanna (1995) surveyed sixteen

studies on the impact of ICT in 1992. He noted like

Perez that the benefits of ICT are innumerable but

untapped due to lack of management support, lack of

understanding of technology, worker employer

conflicts, etc. The resultant effects according to Hanna

(1990) are that most developing countries suffer from

a dearth of readily available reliable information with

adverse consequences for achieving their numerous

developmental objectives. Hanna (1994) also studied

information technology utilization for the development

of India. Her result show that the possibility of fraud

and delayed discovery of fraud is a by-product of

manual paper based system of data processing.

Many other researches have been conducted on

information communication technology. Presnaham,

Brynjolfsson and Hilt (1999) examined firm level data

linking IT use, workplace organization and demand for

skilled labor while Brynjolfsson and Hilt (1996) worked

on the impact of ICT expenditure on firm level output.

Both studies discovered a significant contribution of

ICT expenditure on investment or output level. Davis,

MacCrisken and Murphy (2001) worked on economic

perspectives on software design. Singh, Donoghue and

Broome (1999), Underwood (1999), Wall (1999) and

Widdison (2000) worked on how it could be used in

the law practice. Other related researches on IT and

the law practice are those of Guibault (2002), Agata

and Cizek (2003), Lloyd (2000), and Brochu (2003).

Turban, Lee and Chung (2000) worked on electronic

commerce while Peppard (1993) looked at its

applications for business. Hawkins, Manshell and

Steinmueller (1997) worked on mapping and

measuring of information technology in the electronics

and communication sector of the United Kingdom.

Hawkins and Veroest (1999) developed a methodology

for the assessment of the dynamics and impacts of

electronic commerce. Hawkins and Prencipe (2000)

worked on the impact of electronic commerce on

employment while Hawkins, DeMunck and Stroeken

(2001) studied the effects of electronic commerce in

the banking sector: the report which was prepared for

the Dutch Ministry of Economic Affairs. Some other

researches on the impacts of information

communication technology with respect to the banking

and financial sector are those of Frei and Harker

(1997), Radeck, Wenninger and Orlow (1997), United

States general Accounting Office (1998), Furst, Lang

and Nolle (1998,2000) wenninger(1999), Jordan and

Katz(1999), Mishkin and Strahan (1999), O' Sullivan

(1998, 2000), Couch and Parker (2000), Moody

(2000a, 2000b) and Azarchs (2000). Bamodu (2003) in

his own study worked on how to enhance customer

confidence in e-money products compared with the use

of credit and debit cards as a means of payment for e-

commerce transactions.

Bileta (2003) looked at how to control information in

the online environment while Gehrung (2003) studied

software development, intellectual property and it

security. Wilson (1993) assessed the impact of ICT on

organizational performance while Freud, Konig and

Roth (1997) measured its impact on manufacturing

technology development. Mansel and When (1998)

focused on how information technology can be used

for sustainable development while Wellenius (1993),

presented his research on the development of the

electronics industry in a World Bank symposium.

Colineau and Paris (2003) studied task driven

information presentation while Colineau, Lampert and

Paris (2003) looked at how to ground information

provision within the context of the user's activity using

visual interfaces. Dale, Paris and Tilbrook (2003)

studied information extraction and path merging while

Murray (2004) looked at IEEE next generation wireless

laws. Pfeiffer and Schremmer (2004) worked on

automated anndexing of meeting recordings for

multimedia information retrieval while Granet (2003)

tried to design a compact C board for earth station


Clarke (1996) developed a model for evaluating ICT

impacts. According to him community impacts of ICT

could be evaluated through the indices of changes

within communities and emergence of electronics.

Economic impacts relates to the issues of employment

levels, distribution of income and access to education

and training while social impacts evolves around the

elements of equity of access to information, pricing

regulation, customer rights, electronics freedom amidst

other factors. Various researchers also covered the

importance of information technology in the library.

Nicole Camel (2001) conducted a usability assessment

of libraries related web sites while Ward (2000) tried to

design commercial and academic websites for data

assimilation. Peterson (2002) worked on a guide

simplifying web site management with three

techniques for implementation in libraries. Murdock,

Schenell and Clarke(2002) in their work introduced

readers to open source software for libraries while

Gibbons, Peter and Robin (2003) conducted in an in-

depth review of surveys and studies on user

preferences for e-book functionality and a classified

arrangement for electronic book functionalities.

In Nigeria, some studies have been done on the

importance of impacts of ICT . works done by Sote

(1998), Aiwenhmobor (1991),Ojo(1991), Ekechi

(1990) , etc have centered most of the importance of

ICT . Such works have the significant impacts of ICT

on enhancement of internal efficiency and relationship

between sectors and organizations. Most of these

studies in addition to Uchendu (1990) and NDIC

reports have centered on assessing the impacts of ICT

on the Nigeria banking industry. The result of these

studies shows that ICT has make both negative and

positive contributions to the banking industry. On the

positive side, it has improved internal efficiency, banks

profits, inter banking activities, investment

capabilitise ,etc . On the negative side, it serves as a

tool for banking fraud. According to Ranta (1996) in

spite of the computer's vast potentials for producing

information, it potential as a vehicle of manipulation of

fraud could be equally great. On the issue of bank

fraud, the reports of the Nigeria Deposit Insurance

Corporation (NDIC) reveals that returns of commercial

and merchant banks on fraud has been growth steadily

in million of naira from the eighties. According to

Martin (1988), surely computer crime is now assuming

such proportions that it could well become a subject of

a major inquiry by the organization for Economic Co-

operation and development (OECD). Some other

related studies are with respect to the impact of media

technology on the society such as works by Azubuike

(1991), Chdozie (1991) and Onyekwere (1991).

Results from these studies show that media technology

is an effective tool for communication and rural

development. It has both positive and negative

impacts on personality development especially among


2.3 Summary of Literature and Value Added.

Various literatures have been reviewed on the concept

of information technology, types, importance and

empirical studies on the impact of ICT on sectors in

various countries. Literature reviewed show that

information communication technology has positive

and negative impact on the society. Its positive

contributions are with respect to the improvement of

internal efficiency of sectors and relationship between

organizations, while its negative contributions are with

respect to its use as a tool for the impartation of

negative personality traits especially among

adolescents. In addition, the few existing studies on

the impacts of information technology have been with

respect to the manufacturing sector, educational

industry, adolescent personality formation and

development. Nevertheless, Hanna, Boyson and

Gunaratne (1996) noted that impacts audits of

computerization backed by empirical data in developing

countries have been painfully absent. Systematic

efforts aimed at qualifying and measuring ICT impacts

have been very few and far between. Despites this

deficiency she continued, many articles have been

written with strong and blankets claims that

computerization efforts have either benn consistent

failures or have had sweeping benefits . These are

broad statements, which are not backed by empirical

measurements. According to Her, until a sufficiently

large body impacts audits has been accumulated, most

claims will continue to be largely based on conjecture

and not on real interpretation of facts.'

It is upon this premise that this study has been

designed to fill the gap in the body of knowledge with

respect to the provision of current empirical

information on the impacts of information

communication technology on the Nigerian banking

sector. This study will provide data on the impacts of

information technology on this relatively unexplored

area, which is the banking sector with respect to

empirical assessment on productivity , profitability,

employment structure and staff development.



3.1 Research Design

The experimental research design in line with Obasi

(1999) will be adopted for this proposed study.

Experimental researches involve taking activities to

influence a phenomenon under study while the

consequences of the influence are observed. It also has

three essential component which are independent and

dependent variables, experimental and control groups,

pre testing and post testing exercises. Hence as this

proposed study involves the study of the impact of

information communication technology on a sector,

the experimental research design is deem best suited

for this proposed study.

3.2 Population

The population of this proposed study consists of all

banks in Enugu state of Nigeria.

3.3 Sample

The multi stage sampling technique inline with

Nachmais (1982) will be used for this proposed study.

The first stage involves the selection of the towns and

banks to constitute the sample. The purposive

sampling technique will be used. The head offices of all

banks within the state shall be used. In addition, banks

to constitute the sample must have had a history of at

least three pre and three post experience of ICT

adoption. The purposive sampling technique is used

here because many banks commerce changes with

respect to technological adoption at their head offices.

Before implementing the same at their branch offices,

hence the selection of head offices. The second stage

of sampling involves the determination of the number

of banks to constituted the sample. Eighty percent of

all banks in Enugu state shall be selected through

sample random sampling technique (balloting with

replacement) to constitute the sample of the study.

The third step involves determination of sample

respondents. There shall be no random sampling. All

senior banking staff within the sample constitute the

sample respondents. The purposive sampling technique

shall be used. The choice of senior banking officials is

because they have more knowledge than other cadres

of staff concerning banking operations.

3.4 Data collection and Instrumentation

Primary data will be collected through semi structured

questionnaires and interviews. These Will provide

information in available ICT facilities and level of

adoption, operational efficiency, capacity building,

employment, constraints in ICT utilization and possible

solutions for three years respectively pre and post ICT


Secondary data will be obtained through archival

sources: from the financial records and banking

publications. These will provide time series data on

productivity, employment profit and profitability of the


3.5 Validation of the instrument

Adequate consideration will be given to issue of face

and content validly of the instruments to be used. To

ensure face and content validity, the instrument will be

given to experts in the department of Economics,

University of Nigeria, Nsukka. They will be required to

review and criticize the items on the instruments in

terms of their clarity, appropriateness of the language

and instruments to the respondents and to determine

also whether the items can elicit the information they

are intended to elicit. Their criticisms will be

incorporated in modifying the items on the instrument

to be used. In addition, content validity will also be

ensured furthermore by making sure that each items

on the questionnaire addresses a specific problem of

the study as identified from the trial testing of

instruments to ensure reliability.

3.6 Reliability of the Instrument

In order to ensure the reliability of the instruments, a

modified version of the Kudder Richards reliability

approach known as the Cronbach alpha will employed.

This approach is recommended by Nachmias (1982) to

ensure internal consistency of research instruments.

The instruments will be administered once to the staff

of a bank. Values obtained which are equal or greater

than 0.5 will be accepted as indicative consistency of

items on the instrument.

3.7 Administration of the Research Instrument

The researcher will administer the instruments

personally to respondents. This approach is preferred

in the realization that reliance in the postal system of

delivery is unfavorable due to delays and poor returns.





The objective of this chapter were to present the data

collected in the course of this study, analyse and interpret

the results emanating from the statistical and other tests

carried out on the data, as well as discussing the findings.

The principal objective of this chapter was also the

validation (testing with a view to accepting or rejecting) of

the research hypotheses. These formed the bases of this


The purpose of this research had been the investigation of

the relative impact of information communication

technology on Nigerian Banks. In Furthering the objective

of this study, data in respect of information communication

technology in Nigerian Banks were collected, an presented.


The data so collected, for the purpose of these research

were as presented, in the relevant tables in the appendices

to this report.

The researcher built up a model for the results of the

statistical analysis carried out on the data, were also

presented in appendix two (2) of this report. The Regression

Reports of the model used for this study are as set out



Y = a o + a1 X 1 + a2 X 2 + U


Y = information communication technology

X 1 = Nigerian Banking system

X2 = customer information system

U = Error term

ao, a, and a2 = parameters estimated.


Y = 18.98043 + -0.00024NBS + 0.0023/Ms

T* = (4.927063) (-1.18226601) (1.408537)

R2 = 0.143847, R-2 = 0.82201923

F (2,17) =2.184209, W- statistic = 0.8939

The above estimated parameters in the above model

portray the relationship information communication

technology(Y) as a defended variable and Nigerian Banking

system and customer information system. In the model

above, the autonomous interest (ao) of 18.98043 which is

independent of Nigerian Banking system and customer

information system, shows that even if information

communication technology were Zero, there will still be an

increase of 18.98043 in the rate of information technology.

The slope of the estimated regression line (a1) is -0.00024.

This indicates that there is no positive correction between

Nigerian Banking system and customer information system.


In order to pursue the objective of this study, which has

been the economic analysis of the impact of information

communication technology on the Nigeria Banking sector,

this section of the research report was devoted to the

testing of the research hypotheses earlier stated in chapter

one (1) of this study.

The statistic or tools used in testing the research

hypotheses was the student ‘t’-ratio the procedures and the

rules governing the tests or validation of hypotheses using

the ‘t’ statistic, were earlier stated in chapter three (3) of

this study.



Ho: a1 = O: There is no significant difference in

the productivity of Nigerian banks pre and post

adoption of information communication technology.


H1,: a, = O There is significant difference in the productivity

of Nigerian banks pre and post adoption of information

communication technology.


If the value of the observed ‘t’ (t-ratio) is greater than the

value of the tabular ‘t’ (‘t’ – critical) at n-k degrees of

freedom, at 0.025 level of significance (95% confidence

level), then the null hypothesis (Ho) stands rejected and the

alternative hypothesis (H1) accepted.

This is the say:

If t* bi > teri (0.025) at n – k d.f.

Reject null Hypothesis (Ho).

But if t* bi < teri (0.025) at n-k d.f.

Accept the null hypothesis (Ho) and reject (H1).


The result showed that t* (a1) is – 1.18223 and teri

(0.025) at 17 d.f is 2.110. based on the validation rule

governing this test, the null hypothesis (Ho) is

accepted thus concluding that There is no significant

difference in the productivity of Nigerian banks pre and

post adoption of information communication




Ho: a2 = 0: There is no significant difference in the

profitability of Nigeria banks pre and post adoption of

information communication technology.


H1: a2 = O: There is significant difference in the

profitability of Nigeria banks pre and post adoption of

information communication technology.


If the value of the observed ‘t’ (t-ratio) is greater than

the value of the tabular ‘t’ (t-critical) at n-k degree of

freedom (d.f.), at 0.025 level of significance (95%

confidence level), the null hypothesis (Ho) stands

rejected and the alternative hypothesis (H1) accepted.

That is to say that:

If t* bi > teri (0.025) at n-k d.f.

Reject the null hypothesis (HO)

But if t* bi < tcri (0.025) at n-k d.f,

Accept the null hypothesis and (HO) and reject the

alternative hypothesis (HI)


(0.025) at 17 d.f, is 2.110. from the statistics given

above, toh < tori since 1.408536 < 2.110.

On the strength of the rules governing the varidation of

the research hypothesis, the rule hypothsis (HO) is

again accepted, and the alternative hypothesis (HI)

rejected, thus concluding that There is no significant

difference in the profitability of Nigeria banks pre and

post adoption of information communication



The statistical tests of the research hypotheses

formulated in the course of this study were successfully

carried out by the research, and the summary of the

result & findings of the study were summarized in the

table shown below.

HYPO N K DF R2 Tob Teri Level of Remark
THSIS significance
1 20 3 17 NA -1.18226 2.110 0.025 Not significant
2 20 3 17 NA 1.40854 2.110 0.025 Not significant

Source: from the statistical test carried out by the Researcher.




With respect to the banking sector, the utilization of

information communication technology has increased

attention from bankers and other financial services,

industry participants and policy makers. This is

partially due to the rapid and significant growth in

electronic commerce and the notion that electronic

banking and payments will likely advance more in

tandem with electronic commerce. In addition,

industry analysis's outlining the potential impact of

electronic banking on costs, savings, revenue growth

and increased customer convenience have also

generated considerable interest and speculation about

the impact of information communication technology

on the banking industry.

The profitability of banks world-wide has decreased

from the early 1980s to the 1990s. This has been

attributed to several factors: the decline of traditional

banking activities (deposit taking and lending), poorly

performing debts (arising from poor lending decisions)

and for domestic banks to factors such as depressed

property prices and important local industrial sectors

performing badly. However the analyses of bank

performance tend to be short-term and narrow in their

outlook, and seldom attempt to explain the underlying

trends and processes of change. In this research work,

it is argued that the broad competitive forces of

information technology, globalisation and deregulation

are de-stabilising the banking industry which leads to

irrevocable changes which allow new entrants,

disintermediation, innovation and customer changes on

a much greater scale than has occurred in the past.


This project examined the general impact of Information

communication Technology on the banking industry. The

banking industry has introduced various new customer services

and products using IT. The banking industry has gone through

many changes as a result of the introduction of IT. In fact, the

structure of the industry is continuously changing because of

rapid development of IT. The continued success of IT

applications mean that the limitations of current IT computer

systems in banks have to be re-developed to meet future


In this research work, the researcher has unveiled that

the banking industry has demonstrated a fair amount

of competence in the application of IT. Some banks

were at the cutting edge of IT and have a clear vision

of how IT could be furthered applied successfully.

The research brought to light the fact that IT has

increased competition within the industry. The

realisation 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 using IT to satisfy the demand for

quality services and products. However, there is an

increasing outside threat to the banking industry from

the non-banking sector. Deregulation of the banking

industry has introduced more competition but the low

cost of computer technology has made it easier to

enter the industry. Non-banks can now pick up off the

shelf IT solutions for the services they want to provide.


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Dear Sir/Madam,




I am a National Diploma student of the Department of Business

Administration, Akwa Ibom State Polytechnic, Ikot Asurua, Ikot

Ekpene. I am conducting a study on the topic stated above. The

purpose of the study is to find out about available ICT facilities utilized

in banks and its impact on operational efficiency, productivity,

profitability, capacity building and employment.

You are please required to respond carefully to the instrument

administered to you. You are assured that information given by you is

purely for the purpose of this study and will be treated as confidential.

Thanks for your co-operation.

Yours sincerely



1. Name of Bank .........................................................................

2. Date of establishment ..............................................................

3. Location/Address of bank ..........................................................

4. Please what are the available information communication

technology facilities (ICT) in your bank?

Types of ICT Pick of


A Telephones ( )

B Fax machine ( )

C Computers ( )

D Word processing packages ( )

E E mail ( )

F File transfer protocol ( )

G Web offset (www) ( )

H Gopher ( )

I Please mention others ( )

5. Which year did you using these ICT facilities in your bank?


6. What average number of hours is such ICT facilities used each

working day?

Types of ICT Utilization per hour

a. Telephones ( )

b. Fax machine ( )

c. Computers ( )

d. Word processing package ( )

e. E mail ( )

f. File transfer protocol ( )

g. Web offset (www) ( )

h. Gopher ( )

i. Please mention others ( )

7) What computer software’s do you use in your bank (Tick as


a. Word perfect ( )

b. MS word ( )

c. Spreadsheets (e.g. Excel) ( )

d. Database management system ( )

e. Statistical package (e.g. SPSS. SAS etc) ( )

f. Fault diagoniser ( )

g. Micro banker ( )

h. Oracle ( )

i. Insurance accounting ( )

j. Power point ( )

k. Mention others ( )

8) What do you use the ICT facilities and software for in your bank?
(Tick as appropriate)

a. Data analysis ( )

b. Information processing ( )

c. Information storage and retrieval ( )

d. Information dissemination ( )

e. CD ROM Searches ( )

f. Teleconferencing ( )

g. General Management ( )

h. Forecasting ( )

Graphics/education ( )

j. Modeling and simulation ( )

k. Seminar presentation ( )

i. Mention others ( )

SECTION B: Operational efficiency

1. Please mention the types of new services that your has introduced
as a result of ICT utilization.

2. Please assess the average time it takes your bank to complete the
following activities before and after the adoption of ICT facilities.

Types of Service Pre Adoption Post Adoption

1. Clearing of cheques

2. Processing of bank drafts

3. Local inter-bank transfers

4. International inter-bank transfer

5. Production of bank statements

6. Deposit of money by customers

7. Withdrawal of money by customers

8. Checking of customers balances

9. Processing of Loans

10. Processing of overdrafts

11. Purchase of foreign exchange by

12. Sale of foreign exchange

13. Mention others

SECTION C: Capacity Building and


1. How many people has your bank

employed under the following cadres
as a result of ICT adoption/utilization?

Category of manpower No. employed

a) Senior Level
b) Intermediate Level
c) Junior Category

2. How many people has your bank retrenched as a result of

ICT utilization in the following cadres of manpower?

Category of manpower No. retrenched

a) Senior Level
b) Intermediate Level
c) Junior Category

3. Please provide information on the types, average cost

and duration of tanning programmes organized for staff to

get them acquainted with ICT facilities.

Types of training Duration Amount Amount Amount

in spent Less spent spent
weeks than N50,000 N50,000 to N100,000
N100,000 and above
3)Word processing
4)Power point
5) Spreadsheets
6) Windows
8) Micro banking
10) Novel netware
12) System
13) Programming
14) E mail and
Internet use
15) Financial

16) Please mention