Competition and financial stability of listed deposit money banks in Nigeria

Abstract

The study examined the effect of competition on the financial stability of Deposit money banks listed on the Nigerian Exchange Group from 2010 to 2019. This results from consistent decreases in the number of listed banks since the consolidation of DMBs in 2005. The study used the Lerner index to measure competition, and Z-Score was used to measure the financial stability of the banks using the data gathered for the 10 years of the study using both descriptive and inferential statistics of the Random Effect Method. The study revealed that competition exists among banks in Nigeria and thus affects their financial stability. However, the study hence recommends that financial innovations should be encouraged by bank CEOs to enable them to compete among themselves effectively. In conclusion, this study also suggests that regulatory authorities be up to the task of monitoring the lending rate and policies of banks because too high-interest rates will increase default rates, which will thus affect the financial stability of Deposit money banks.