Market Power of Nigerian Deposit Money Market: Evidence from Bresnahan-Lau’s Approach

Folorunsho Ajide and Adetunji A. Aderemi
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Adetunji A. Aderemi: Osun State University, Osun, Nigeria, Postal: Faculty of Management Sciences,, https://www.unilorineconsworkingpapers.com.ng/

No 14, Working Papers from Department of Economics, University of Ilorin

Abstract: Over the years, both structural and conduct regulations had been experienced in Nigerian deposit money market. Structural regulation focused on market structure, featured with the functional separation of firms into complementary activities (for example, caving out microfinance bank from the conventional commercial banking functions), restrictions on entry and rules regarding the operation of foreign banks. However, this structural regulation may tend to make entry difficult, and may tend to protect incumbent firms from competitive pressure. This arrangement might increase the level of market power of Nigerian deposit money market. By definition, market power specifies how firms in a market influence prices, and reveals the level of competition in the market. This study investigated the level of market power in Nigerian deposit money market using Bresnahan-Lau’s model. Annual data for the period of 1986-2012 were sourced from annual financial statements of Nigerian banks and Central Bank of Nigeria statistical bulletin. The model was estimated using Two-stage-Least Square (TSLS). The results revealed that Nigerian deposit money market maintained monopolistic competition. The study concluded that the banking reforms introduced had improve competitive condition of the industry, hence; the practice of monopolistic competition.

Keywords: Bank; Bresnahan-Lau’s model; Market power; Competition; Deposit market (search for similar items in EconPapers)
Pages: 8 pages
Date: 2015-05-22
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Citations: View citations in EconPapers (4)

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