Effect of Financial Structure on The Efficiency of Financial Intermediation in The Nigerian Banking Sector

Abstract

Banks are financial intermediaries that accepts deposits and lends same out efficiently, to make profits and remain a going concern. This study examines the effect of financial structure on the efficiency of financial intermediation in Nigerian banking sector between 1981-2020. The study which relied on interest rate spread as proxy for efficiency of financial intermediation; aggregate capital funds, aggregate funds through money market facilities and monetary policy rate (MPR) as proxies for financial structure. Autoregressive Distributed Lag (ARDL) modelling technique was used for analysis. Results reveals that longterm funds (aggregate capital funds) have statistical significance on efficiency of financial intermediation while short-term funds (aggregate money market funds) have negative statistical significance and MPR is not statistically significant. From these findings, the study recommends discussing shoring up again, capital requirements for Nigerian banks and recapitalizing ailing ones; mobilizing cheaper customers’ deposits to meet short-term obligations against reliance on money market facilities; and maintenance of the MPR at the lowest possible to enable cheaper pricing of funds for better efficiency