CHAPTER ONE

1.1 INTRODUCTION

As we move into the 21st Century, banks all over the world

realize that only those that overhaul the whole of their

payment and service delivery systems and operations are

likely to survive and prosper in the New Millennium. This is

due to the pressures of globalization, consolidation,

deregulation and rapidly changing technology.

Today’s business environment is very dynamic and undergoes

rapid changes as a result of technological innovation,

increased awareness and demands from customers. In view of

this, the banking industry of the 21st Century operates in a

complex and competitive environment characterized by

changing conditions and highly unpredictable economic

climate. In view of the foregoing, the application of

Information and Communication Technology (ICT) concepts,

techniques, policies and implementation strategies to banking

services has become a subject of fundamental importance and

concern to all banks and indeed a pre-requisite for local and

global competitiveness Agboola (2005).

1
1.2 STATEMENT OF THE PROBLEM

In Nigeria, the use of computer has become more widespread

in banks than in other sectors of the economy except perhaps,

the energy sector; yet, the banks still have a long way to go in

order to meet the standards of adoption of Information and

Communication Technology (ICT) of their counterparts

elsewhere. There are many problems confronting banks in

Nigeria in their use of ICT. Studies have revealed that most of

the problems facing the banks are telecommunication-related,

and are directly traceable to problems with the public

telecommunication services which are the backbone of their

communication links.

1.3 OBJECTIVES OF THE STUDY

The objective of this research work is to demonstrate in a

schematic manner, the aspects of present-day banking

business where performance could be significantly enhanced

through the application of Information and Communication

Technology (ICT). Banks in Nigeria currently operate in an

environment characterized by a fluid customer loyalty and

intense competition as they scramble to increase their market

2
share, and to look for ways of coping with significantly rising

operating cost and dwindling profit.

This research project will examine the general impacts of

Information and Communication Technology (ICT) on the

banking industry. The following objectives will be evaluated:

- To give a comparative analysis between the growth of fixed

telephone lines and mobile phone lines with respect to

growth in ICT.

- To examine using a Trend Analysis, the growth rate of

Intercontinental Bank within the period 2003-2008 with

respect to growth in ICT

- To identify the effect of the volume of fixed telephone lines

and mobile phone lines between 2003-2008 on the

performance of Intercontinental Bank Plc in terms of growth

in loans & advances, customers’ deposits and profit after

tax (PAT)

- To explore the current ICT applications in Nigerian banking

industry

3
1.4 RESEARCH QUESTIONS

- What effect has the use of ICT systems like Telephone,

VSAT, MICR, ATM, Computers etc have on

Intercontinental Bank’s productivity

- What effect has the use of ICT-driven technologies have

on customers’ patronage

- What effect has the growth of fixed and mobile telephone

lines have on Intercontinental Bank’s performance

1.5 RESEARCH HYPOTHESIS

HYPOTHESIS 1
H0: Adoption of ICT by Intercontinental Bank Plc has not
increased its productivity

HA: Adoption of ICT by Intercontinental Bank Plc has

increased its productivity

HYPOTHESIS 2
H0: Adoption of ICT by Intercontinental bank has not
improved customer’s patronage
HA: Adoption of ICT by Intercontinental bank has improved
customer’s patronage

HYPOTHESIS 3
H0: There is no variation of growth in ICT systems

4
 HA: There is variation of growth in ICT systems

HYPOTHESIS 4
H0: Growth in Intercontinental Bank’s performance is
independent on ICT

HA: Growth in Intercontinental Bank’s performance is

dependent on ICT

1.6 SCOPE AND LIMITATION OF THE STUDY

Due to unavailability of data and the state of diffusion of ICT in

this part of the world, the researcher employed secondary

data of the bank during the introduction of General System of

Mobile communications (GSM). Also, the data on ICT was

collected before and after the introduction of GSM.

However, the study is strongly limited to cover the period of

1995 to 2008. Specifically, the study divides the period into

three; 1995-2008(growth rate of fixed and mobile telephone

lines), 2003-2008 (growth rate of fixed and mobile telephone

lines against Intercontinental Bank’s Performance) and lastly

2003-2008 (performance of Intercontinental Bank Plc)

5
1.7 JUSTIFICATION OF THE STUDY

In the early stages of globalization, deregulation and

consolidations, organizations usually dedicate more resources

and priority to financial and personal issues, downplaying

operational issues like ICT and its relative importance to

organizations. The increasing competitive pressures on

companies, many of which operate in a global economy (e.g.

banks), has been a strong driver for ICT adoption. Firms are

constantly searching for opportunities to cut costs and ICT

holds great promise in this respect as it increases the

efficiency of a firm’s business processes, both internally and

between trading partners in the value chain.

Now, the use of ICT among Nigerian banks is no different

where its role as a core operational driver was established in

the early 1990’s; transforming the delivery of banking

products and services. The availability of communications

networks and clients/server technology saw the birth of

‘online, real-time” banking where all or some branches had

access to computing resources (usually located at the bank’s

head office).

6
 Today, the mere possession of online real-time technology is

no longer a source of competitive advantage for all operators

in the sector. The role of ICT has evolved today, where banks,

in addition to automating processes and improving service

delivery, implement ICT solutions that facilitate various

business strategies and thus, offer competitive advantage.

This study is of great importance considering the fact that

entry barriers to some industries have been greatly lowered

by leveraging on ICT. Also, the pace of globalization,

liberalization, deregulation, commercialization, and

privatization is rapidly opening up markets and making the

existing ones more competitive. This study highlights various

opportunities presented by Information and Communication

Technology (ICT) that can be harnessed in order to compete

favourably in this increasingly competitive and unpredictable

business environment. This study is justified in the sense that

it highlights the imperative of ICT and its inherent dynamism.

1.8 SIGNIFICANCE OF THE STUDY

Electronic communication using digital information and

communication technologies is already the standard means of

7
 inter-organisational and inter-country communication in most

developed world, and also increasingly in the third world

countries. They are helping individuals, companies and

countries to store and transmit information held anywhere in

the world, and to communicate them across the globe

irrespective of time and space. This means that whoever does

not have the technical infrastructure to participate in this new

mode of communication would not be able to trade or relate

with other individuals, companies or countries of the world in

the coming century. Therefore, this study is significant

because Nigerian banks cannot afford to let this opportunity of

embracing Information and Communication Technology (ICT)

pass it by.

1.9 ORGANISATION OF THE STUDY

The arrangement of the research is as follows:

Chapter One: introduction already explained above,

statement of the research problems, objectives of the

research, research questions, research hypotheses, scope of

the study and justification of the study.

Chapter Two: background to the study

8
Chapter Three: Literature Review and Theoretical Framework

Chapter Four: Research Methodology and Empirical Analysis

Chapter Five: Summary of findings, Conclusions &

Recommendations.

9
 CHAPTER TWO

BACKGROUND TO THE STUDY

2.1 INTRODUCTION

The advent of information and communication technology

(ICT) is rapidly changing the banking industry; it is a powerful

force that drives the world towards a converging commonality

(Levitt, 1992). From the beginning of human race, technology

has been one of the most essential and most important factors

for the development of mankind (Coombs et al, 1987).

Information Technology (IT) can be defined as the modern

handling of information by electronic means, which involves its

access, processing, storage, retrieval, transfer and delivery.

Research shows that information and communication

technology (ICT) affects financial institutions by easing

enquiry, saving time and improving service delivery.

Some of the ICT technologies presently in use in the Nigerian

banking industry are ATMs, Smart Cards, telephone, facsimile,

wireless radiophone, VSAT (very small aperture satellite

terminal), telegraphy and computer systems. Some banks in

Nigeria have LANs (local area networks) in most of their

10
 branches and some of the banks have initiated home banking

services. Nigerian banks are yet to reap the full benefits of

Information and Communication Technology (ICT). This is due

to the problems of infrastructural facilities, economic and

regulatory variables of their operating environment. These

problems have to be surmounted in order to fully realize the

benefits of Information and Communication Technology (ICT).

2.2 COMPARATIVE ANALYSIS-THE CASE OF DEVELOPING

ECONOMIES
However, similar growth and development driven by ICT have

not been fully witnessed in developing countries. For instance,

Dewan and Kraemer, (2000), found that the contribution of ICT

to economic growth in developing countries was statistically

insignificant compared to that of developed economies. In

another study, Pohjola M. (2000), found that the rate of return

from ICT in developing countries from 1980’s to mid 1990’s

was less than 2% compare to 10% in developed countries

during the same sampled period. The lower return from ICT in

developing countries is attributed to inadequate

infrastructure/enabling environment to support ICT

development in the economy. This problem is further

11
compounded by the low ICT literacy level among the

population.

The idea that modern ICT services and policies have positive

impact on economic growth (and conversely their absence is a

major obstacle to growth) was a general conclusion of two

conferences jointly organized by the Telecommunication

Development Bureau of International Relation program of

Webster University in Geneva, September 1996 and February

1998 under the title “Telecommunication and Economic

Growth”.

In trying to analyze the relationship between ICT and

economic growth with particular reference to some African

countries e.g. Nigeria, one is often confronted by unavailability

of data. Thus, to study the impact of ICT, another route was

adopted. A traditional way of identifying a major growth

industry is by looking at the elasticity of demand for the

output of the sector with respect to total demand in the

economy (GDP). To measure the impacts of ICT on GDP, we try

to answer the following questions:

12
 a. what is the share of ICT sector in the principal macro-

economic variables (GDP, investments, employment and

exports)?

b. does the share of ICT tend to rise in some or all of these

key variables?

In defining ICT sector, the key variables are:

a. ICT services such as the internet and telecommunications

b. ICT equipment such as the number of personal

computers (PCs) and the number of telephone lines

(compudensity and teledensity)

c. Employment in the service and equipment sectors

Year Growth in Total Total GDP @

IT staff employmen organizatio current
t in ICT n budget in basic prices
sector ICT
investment
(Millions)
2000 1,520 N/A 464 4,582,127.3
0
2001 1,868 N/A 523 4,725,086.0
0
2002 2,547 N/A 719 6,912,381.2
4
2003 N/A 446,000 N/A 8,487,031.5
8

13
 Source: CBN Economic and Financial Review September,
2006 and NITDA

2.3 REVIEW OF THE NIGERIAN BANKING SECTOR AND ITS

PERFORMANCE
The oldest commercial banking institution in Nigeria is the

First Bank of Nigeria. It began operation in 1892, with the

name African Banking Corporation (ABC). In May, 1893, it

assumed the new name, Bank of British West Africa (BBWA)

and in 1912, it bought over a rival bank, the bank of Nigeria. In

1957, the name was changed to the Bank of West Africa

Limited. After five years of negotiation, the Bank of West

Africa (BWA) merged with the bigger bank, the Standard Bank

and was incorporated on June 20, 1969 under the name

Standard Bank of Nigeria Limited. In 1979, the Standard Bank

of Nigeria Limited was renamed the First Bank of Nigeria.

Another colonial bank with chequered history is the Barclays

Bank D.C.O. It was renamed Union Bank (Nigeria) Limited in

1979 following the discovery of its financial connection with

apartheid South Africa, a situation most unacceptable to un-

apartheid Nigeria.

At the end of World War II, another foreign bank, the British &

French Bank of Commerce & Industry established a branch in

14
 Nigeria in 1949. From 1956, it was simply called the British &

French Bank. In 1961, the bank was renamed the United Bank

for Africa (UBA) with the French, Italian, British and Dutch

companies as shareholders.

Another major commercial bank of foreign origin to establish

in Nigeria is the International Bank for West Africa, now

Afribank. These four banks are referred to as the “big four” in

Nigeria’s commercial banks categorization. These foreign

banks of the colonial era discriminated against Nigerian

businessmen but financed a restricted group of customers, the

colonial government, the marketing boards and the foreign

firms.

2.4 MUSHROOMING OF EARLY INDIGENOUS BANKS

In order to break the monopoly of the colonial banks,

indigenous banks mushroomed in the absence of a Banking

Ordinance to regulate banking business. The first attempt to

establish an indigenous bank was in 1929. Indigenous West

African businessmen resident in London acquired a bank in

London and transferred its operation to Lagos. Because of bad

15
 management, the bank known as the Industrial and

Commercial Bank folded up in 1930.

In short, between 1947 and 1952, there was a rush to fill the

banking gap created by discriminating foreign banks. During

this period about 100 indigenous banks were established but

majority of them were grossly under-capitalised, mis-managed

and over-stretched. A number of the indigenous banks

collapsed between 1952 and 1960. Out of the twenty eight

(28) banks founded in 1952 alone, twenty two (22) crashed

and of all the 185 banks registered between 1947 and 1952

only 25 survived.

2.5 THE COLLAPSE OF INDIGENOUS BANKS

The 30’s and 40’s witnessed mushrooming of mainly under-

capitalised and mis-managed indigenous banks which

collapsed as suddenly as they emerged. The collapse of these

banks led to the promulgation of the Banking Ordinance of

1952, following Paton’s 1948 Official Enquiry on why those

banks collapsed. This was the first attempt to put down the

condition under which a bank can operate in Nigeria. Others

are the Banking Act of 1958, 1969 and the Banking and Other

16
Financial Institution (BOFID) Decree No. 25, 1991 and the

amendment.

To cap it up, the period 1947-1952 were littered with debris of

failed banks; therefore, it is not erroneous to conclude that the

Nigerian Banking History has been repeatedly punctuated with

bank failures. Nevertheless, to remain competitive, some

banks have deployed information and communication

technology (ICT) into their operations. The use of ICT by banks

in their operation has gathered momentum in recent years.

Liberalization brought several changes to Nigerian banking

industry, as new privately-owned banks came on board as

technology-savvy banks and offered several innovative

products at the front office for the customers based on

technology, the demonstration effect caught on multi-channel

offerings like machine-based (ATMs and PC-banking), card-

based (credit/debit smart cards) communication-based (tele-

banking and internet banking) ushered in anytime-anywhere

banking to customers. Banks sought economy of scale in

banking services at the expense of size; they sought optimal

business structure and secured the competitive imperative of

17
 economy of scale. It is evident that the adoption of information

and communication technology (ICT) has facilitated easy flow

and safe storage of information. It has been successfully

employed to improve customer service, enhance decision

making process, reduce the strain on management and make

overall banking operations more efficient and less

cumbersome.

Number of banks that adopted various ICT products at

different periods.
ICT Product 1990- 1993- 1996- 1999- 2002-
1992 1995 1998 2001 2004
Automated Teller Machine - - 1 4 14
(ATM)
Electronic Fund Transfer 4 1 3 10 14
(EFT)
Electronic Data Exchange 2 2 4 5 7
Smart Card - - 1 12 11
MICR Cheques - 20 10 4 1
Local Area Network (LAN) 13 8 6 5 3
Wide Area Network (WAN) 5 3 7 13 5
Point of Sale System (POS) 2 1 3 6 9
Telephone Banking - - 3 10 12
Make cheque available 1 1 3 7 10
programme
Computerized credit rating 1 3 2 6 13
Daily calculation of 19 2 4 6 3
accounts programme
Source: Research Survey, 2004

Table 1 shows that the adoption of most of the ICT products in

the studied banks took place within the last five years.

Automatic Teller Machine (ATM), Smart Cards and Telephone

banking were not available between 1990 and 1996 in any of

the studied banks. Only one bank claimed to have Electronic

18
Home and Office banking services within the period. However,

striking exceptions were noticeable in the adoption of MICR

and LAN technologies where most of the banks adopted their

use before 1998. The reason for the early adoption of MICR

technology was due to the mandatory stand of the apex bank

(CBN) on a phased automation of clearing house scheduled to

come into operation between 1990 and 1993. Since MICR

cheques were central to the implementation of this policy,

most banks were forced to adopt its usage. Early adoption of

LANs was influenced by the advent of micro-computers in the

fourth generation which made inter-connectivity feasible.

However, there is growing evidence that customers have

started associating quality of service in a bank with the bank’s

possession of an “on-line real-time” systems. As a result of

anchoring their operations on computer-based delivery

systems, the new generation banks have become very

profitable. Banks and other financial institutions in Nigeria

currently operate in an environment characterized by fluid

customer loyalty and intense competition as they scramble to

increase their market share and at the same time explore

avenues to cope with high staff turnover, and significantly

19
 rising operating cost. In view of the enlarged scope of the

banking business in Nigeria, service delivery channels have

been improving to meet the ever-changing needs of

customers. This development has brought improvement into

the Nigerian banking industry.

2.6 INFORMATION AND COMMUNICATION TECHNOLOGY IN

THE BANKING INDUSTRY
Information and communication technology has already

become the digital nervous system of banks the world over.

This is because banking is no longer perceived as merely the

generating of deposit liabilities and the creation of liquid

assets; but rather the generation, storage, manipulation,

communication and application of financial information. ICT is

perceived as an instrument for engendering competitive

advantage in enterprises as it promotes greater efficiency and

effectiveness in financial transactions. The importance of ICT

in enabling enterprises develop more efficient and effective

operational and management process have been pointed out

by Frenzel (1996). It is also the reason Holloway (1995), wrote

that an increasingly important component of bank’s

technological focus is the personal computer.

20
The Nigerian banking industry has demonstrated a fair amount

of competence in its quest for ICT adoption and applications,

some banks were at the cutting edge of IT and had a clear

vision of how IT could be further harnessed and applied

successfully.

According to Woherem (1997), Nigerian banks since the

1980’s, have generally performed very well in their

investment profile and use of IT systems. Banks have spent

millions of Naira on ICT every year in a bid to fully automate

its operations and services to customers. The industry

recognized that ICT was a major key to its development. Also,

as a result of the increased demand for deposits, Nigerian

banks have realized the imperative of good and prompt

customer services. Also, due to the fact that some customers

lost their deposits in the erstwhile technically-insolvent banks,

they have realized that one way in which they can provide

quality service is through the use of information and

communication technology (ICT). Hence, there is a growing

rate of adopting new technologies in Nigerian banking

operations. This has brought to light, the fact that ICT has

increased competition within the industry. The realization that

21
the market size is not really increasing, has made banks more

competitive. Also, the expectation of their customers is very

high and in response, banks are using ICT to satisfy the

demand for quality services and products by customers.

As a result of anchoring their operations on computer-based

delivery systems, the new generation banks have become

very profitable. They have introduced integrated banking

systems using WANs (Wide Area Networks), thus, their

customers no longer have to carry cash for a long distance.

Intercontinental Bank Plc is a good example of banks that

have integrated on-line, real-time banking systems.

Generally, the banking industry in Nigeria has witnessed an

unprecedented growth in the past decade, due mainly to

deregulation of the economy. Deregulation of the economy

brought about increased competition but the low cost of

computer technology has made entry into the industry easier.

Banks have expanded their branch networks at a very rapid

rate, and there are now far more employees, larger customer

and staff database, more robust computer systems and a

general high level of automation and computerization than in

22
the late 1980s. This has brought an increase in the need for

exchange of information between different banks and between

branches of the same bank. The present vogue of having an

on-line real-time banking network across branches of some

banks has also promoted the importance of electronic

communications between banks. This growth has created a

requirement for greater exchange of data and information

within and between banks and other financial institutions. This

growing need for exchange of electronic information has

however, not been met with a commensurate improvement on

nationwide telecommunication infrastructure.

Despite the fact that many of the new generation banks based

their marketing strategy on the possession of supposedly on-

line real-time systems, security of information systems was

found to be very vulnerable in general. The amount of

resources required for security is lower than required. The fact

that “hackers” can still get into banking systems easily

without insider help demonstrates the magnitude of the

problems. It is found that their system links are usually down

for about 50 percent of their time. Many customers feel

cheated and frustrated by this reality and do complain about

23
 these incessant downtimes. IT fraud also, is a major problem

of the banking industry especially where plastic cards are

concerned. The increased IT knowledge of the general public

and proliferation of cheap computer technology means that

weaknesses in card payment may be exploited fraudulently.

Millions of Naira is lost every year simply because the cards

are not secure enough.

2.7 PAYMENT SYSTEMS

The payment system witnessed significant development from

2003 to 2008. Notable among these were; the reduction of the

clearing cycle from T+5 to T+2 and the harmonization of up-

country and local clearing cycles with a view to reducing

floats; the opening of six clearing houses to increase access to

financial services in the new branches; installation of Magnetic

Ink Character Recognition (MICR) machines at the new

clearing houses and the deployment of the Nigeria Automated

Clearing System to the Port Harcourt zone to increase the

efficiency of the clearing process.

The use of electronic payment system which was at a very

rudimentary stage in 2003 recorded significant improvements

24
 in 2008. At the wholesale payment segment the CBN Inter-

bank Funds Transfer System (CIFTS) was adopted for the

transfer of Naira deposit on behalf of Bureau de change and

remittance of taxes collected by DBMs on behalf of Federal

Inland Revenue Service (FIRS).

The use of e-payment such as ATM, Web-internet (POS), and

mobile payments, increased both in volume and value with

ATM accounting for 90.5% of transactions in 2008

Market Share in E-payment Market, 2007 and 2008

e-payment Volume volume volume Volume

segments
2007 2008 2007 2008
ATM 15.7 60.1 131,562. 399,712.6
7
(88.9) (91.0) (90.5)
(88.5)
Web (Internet) 0.9 1.6 10,622.6 25,054.5
(5.1) (2.4) (7.1) (5.7)
POS 0.4 1.2 6,442.1 16,115.3
(2.4) (1.8) (4.3) (3.7)
Mobile 0.7 3.2 95.6 697.8
(3.8) (4.8) (0.1 (0.2)
Source: Report of the Financial Sector National Technical
Working Group.
N/B: Figures in brackets are percentage share of total.

25
2.8 BACKGROUND INFORMATION ON INTERCONTINENTAL
BANK PLC
The bank was founded in March, 1989 as the Nigerian

Intercontinental Merchant Bank Plc, a wholesale bank

established in response to the growing needs of an

increasingly sophisticated banking public. With a corporate

philosophy emphasizing innovations, service, excellence and

customer focus, Intercontinental Bank Plc soon made its mark

as a bank of choice among customers in need of reliable and

prompt services backed by state-of-the-art technology.

Within five years of existence, precisely 1993, the bank was

adjudged the top issuing house in the first deregulation rating

of the market, with its pre-tax profit of N592.6 Million for the

same year was the highest in the merchant banking sub-

sector. The bank has maintained this trend of profitability and

its group profile result surpassed the One Billion Naira mark in

1998. Intercontinental Bank Plc has also grown to become one

of the largest and most diversified financial service groups in

Nigeria, with a controlling stakes in equity bank, substantial

interest in a discount house, Intercontinental Capital Markets

Ltd, an associate company, Intercontinental Securities Ltd,

26
which in turn has a majority stake equity stake in an insurance

firm, WAPIC Insurance Plc. The bank has sustained its strong

innovative roots as evidenced in its market-leading treasury

products such as the Intercontinental i-Cash International

product designed as a safe, convenient and robust medium of

effecting settlement of due payment such as remitting school

fees to wards anywhere in the world and the Intercontinental i-

Cash Mobile to serve the needs of people in Nigeria who

desire the fastest means of transferring funds to their loved

ones, folks, friends and business partners through the use of

mobile phones.

In July, 1999, Intercontinental converted to a commercial

bank, to better position it for excellent service delivery to both

local and international clientele in the next Millennium. The

total asset base of Intercontinental Bank Plc hit a record high

of N110.6 Billion according to financial results for the first

eight months of 2004 approved by the Central Bank of Nigeria

(CBN) Weekend. The growth is about 70.6 percent rise over

the N64.8 Billion recorded in the corresponding period of

2003. The bank is adopting a robust consumer and corporate

banking approach designed to sustain market leadership and

27
 competitiveness through market segmentation, customer

relationship management (CRM), product innovation,

improved service delivery and low cost channel distribution.

They have strategic partnerships with world-class financial

institutions including BNP Paribas, Veetis Capital, AIG

Investments, ECP Investments and other leading organizations

for capacity building. The bank is leveraging these

relationships to further develop competencies in asset

management, consumer finance, insurance and risk

management. With over 300 branches spread across Nigeria

and 8 in Ghana, the bank is making inroads in Africa through

its regional expansion strategy. In 2006, the bank commenced

global expansion drive with the acquisition of Citi Savings and

Loans Company Limited in Ghana which it has since

transformed into a universal bank-intercontinental Bank

Ghana with eight branches located at key commercial hubs in

Ghana. The bank’s UK subsidiary has obtained approval and

has commenced operation.

2.9 INFORMATION TECHNOLOGY IN NIGERIAN BANKING

INDUSTRY (WITH REFERENCE TO INTERCONTINENTAL
BANK PLC)
28
The banking sector is undergoing fundamental changes. The

deregulation and consolidation of the industry at the in this

decade is mainly responsible for these changes. Deregulation

has opened up the market, and as such, introduced several

threats and opportunities. Since banking involves the

collection, storage, retrieval and manipulation of information,

this competitive trend within the sector suggests the need for

a more dynamic and innovative approach to the management

of information systems, hence the use of information and

communication technology. In its quest to become an

established player in the industry, Intercontinental Bank Plc

introduced ICT into its operations to enable former time-

consuming tasks to be digitalized, thereby allowing personnel

to be re-assigned to higher margin non-routine jobs.

Furthermore, the strategic importance of ICT is growing

because of its potential to reduce costs of banking services,

bring them closer to users and consequently attract new

clients. Intercontinental Bank’s banking operation is primarily

driven by ICT, which renders the Teller superfluous by

automating the traditional labour-intensive settling of

accounts. While Automatic Teller Machines (ATMs) and credit

cards were the early enablers to reduce the need for front-

29
 desk service workers like cashiers etc, the internet now offers

the possibility of offering and using ubiquitous financial

services from virtually everywhere. Also, the use of ICT has

made formerly paper-based task and routine tasks performed

by humans increasingly redundant as routine and standard

banking operations are increasingly being performed digitally,

thus, feeing employees to perform more complex and

stimulating tasks. The bank has integrated ICT into its

production processes and quality management and, most

recently, in marketing & customer services. These are widely

considered as key to improve competitiveness. Competing in

global market requires not only optimized cost structures,

maximal efficiency, and products and services of high quality

but also the ability to communicate effectively and cooperate

with business partners and potential customers.

Furthermore, as a result of increased competition that has

lowered margins in lending operations (the bank’s traditional

business), banks have diversified their sources of income and

rely increasingly on income from fees services e.g. ATMs

charges rather than interest rate spreads.

2.10 SOFTWARE OPTIONS

30
From the Nigerian Deposit Insurance Corporation (NDIC)

survey (1991), about 85% of Nigerian banks, especially the

new generation banks have implemented packaged banking

systems on minis or super micros such as Micro banker, Bank

master, Kapiti, Banker80, Globus, Bankos, Pinacle

HRIS/Payroll, Mega-man, Phenix, Flex Cube and other

proprietary software installed in the respondent banks

including Intercontinental Bank Plc. Functional managers of

the banks have terminals through which they could personally

access customer records and make prompt decisions. Other

on-line options available include:

i. Transaction enquiries on customers’ accounts

ii. Customer’s account balance enquiry

iii. Clients’ account maintenance (average balance)

iv. Stopped cheques and accounts enquiries (cheque

maintenance)

v. Statement

vi. Requests

vii. Customers’ particulars maintenance

viii. Batch balance enquiry at closing time.

31
 Control measures are usually used along with these options in

order to guard against abuse. An important one is the use of

access number and test keys. Every authorized user is

provided with a password in the form of access identification

code with which he could be identified when accessing the

system. In addition, users are restricted to only the options

relevant to their core competencies (sign on right for different

units).

2.11 THE MICRO BANKER MANAGEMENT INFORMATION

SYSTEMS
The bank’s automated management system apart from the

direct access provided by the on-line facilities satisfies its

house keeping routines by making information reach

managers by way of a whole variety of analysis from statistical

statements which can generally be referred to as reports.

These may be classified into three broad categories.

a. Report providing background information for operational

management, usually produced weekly:

- Financial report balance sheet

- Fixed asset report

- Staff personal records

32
- Customers’ liabilities report

- Inter-branch account reconciliation

- Reports from the stationery and supply inventory system

b. Report which provides control information for influence and

guide current and short-term tactical decisions:

- Credit control report reflecting customers’ withdrawal and

deposits trends)

- Overdue loans reports

- Dormant accounts reports

- Stopped cheques and accounts reports

- Daily customers’ account maintenance reports

- Audits trail reports

c. Reports which provide statistical data for forecasting

corporate planning and strategic management:

- Investment appraisal reports

- Budget models

One of the advantages of information technology-driven

management information system (MIS) is that, timely and

33
accurate returns are made automatically to the interested

parties especially, the CBN. Failure to comply usually attracts

stiff sanctions. Furthermore, an information technology-driven

management information system possess flexible properties

which enables banks to cope with changes in their operational

environment e.g. unusual request from customers, sudden

changes in interest and foreign exchange rates.

The core business and customer-centric strategy at

Intercontinental Bank Plc is based on the seamless integration

of customers, people, processes, technology and risk. This

approach tailors branch services to meet the needs of the

market and it is centered on the delivery of excellent

customer solutions by focusing on providing products targeted

to the demographics of a local market, this significantly

improves contacts for customers while driving deposit

mobilization and customer satisfaction. With over 300

branches spread across Nigeria and 8 in Ghana,

Intercontinental Bank Plc is one of the foremost provider of e-

banking services in Nigeria, with over 30 products and

services that are ICT-driven and the bank is structured to

deliver the greatest convenience to their customers. The

34
bank’s broad customer base, and improved product range

coupled with considerable cross-selling potential has provided

a sustained boost to the bank’s earnings power. The bank has

posted strong results as reflected in the outstanding growth of

its major indices.

Customer Deposits NGN Million

Table 2.11.1
Year Amount (NGN)
2003 35,584
2004 50,244
2005 110,013
2006 252,280
2007 467,933
2008 1,057,079

Source: Intercontinental Bank Plc Publications

From table 2.11.1 above, mobilization of savings increased

exponentially from 35,584 in 2003 to 252,280 in 2006 and to a

total deposit of 1,057,079 in 2008. This figure was the highest

in the banking industry in Nigeria and this made the bank to

become the first to cross the N1 Trillion deposit mark.

Table 2.11.2: Loans and Advances to Customers NGN

Million

Year Amount (NGN)

2003 12,602

35
2004 21,653
2005 52,598
2006 161,357
2007 262,536
2008 435,457

Source: Intercontinental Bank Plc Publications

The consistent increase in loans and advances to its

customers indicate that innovations has become a great

strength of the bank which has impacted in the huge customer

base which in turn help the bank create new and better

products and services thereby engendering customers’

satisfaction. To sum it up, it is safe to conclude that even

though the bank is faced with the challenges of poor

infrastructure in the economy, the bank is well-positioned to

creatively tackle the challenges of the future.

36
 CHAPTER THREE

LITERATURE REVIEW AND THEORETICAL FRAMEWORK

3.1 INFORMATION AND COMMUNICATION TECHNOLOGY

(ICT): ISSUES AND CONCEPTS
Today’s business environment is very dynamic and undergoes

rapid changes as a result of technological innovation,

increased awareness and demands for customer. Business

organizations, especially the banking industry of the 21st

Century operate in a complex and competitive environment

characterized by these changing conditions and highly

unpredictable economic climate. Information and

communication technology is the centre of the global change

curve. Laudon and Laudon, (1991), contend that the

application of information and communication technology to

banking services has become a subject of fundamental

importance for competitiveness. ICT directly affects how

managers decide, plan and what products and services are

37
offered in the banking industry. It has continued to change the

way banks and their corporate relationships are organized

worldwide and the variety of innovative devices available to

enhance the speed and quality of service delivery.

Harold and Jeff (1995), contend that financial service providers

should modify their traditional operating practices in order to

remain viable in the 1990s and the decade that follow. They

claimed that the most significant shortcoming in the banking

industry today is a widespread failure on the part of senior

management in banks to grasp the importance of technology

and incorporate it into their strategic plans accordingly.

Woherem (2000) claimed that only banks that overhaul the

whole of their payment and delivery systems and apply ICT to

their operations are likely to survive and prosper in the new

Millennium. He advised banks to re-examine their service and

delivery systems in order to properly position them within the

framework of the dictates of the dynamism of information and

communication technology. The banking industry in Nigeria

has witnessed tremendous changes linked with developments

in ICT over the years. The quest for survival, global relevance,

maintenance of existing market share and sustainable

38
development has made the exploitation of the many

advantages of ICT through the use of automated devices

imperative in the industry.

It is no longer news that technological breakthroughs,

especially in information and communication technology (ICT)

have brought unprecedented benefits to economies

worldwide. These positive externalities by ICT are observable

in all sectors of the economy – in the ICT-producing sector as

well as the ICT-using industry. Generally, ICT enhances

business efficiency, enables swifter product market

penetration, promotes superior labour productivity, creates

avenues for rapid exchange of information, improves logistics

and delivery systems as well as facilitates efficient services to

customers. ICT allows countries to deal with the challenges

pertaining to the society, the economy and the environment.

Effective management of these challenges, via ICT, can boost

economic growth in any economy.

Various studies have examined the relationship between ICT

and economic growth particularly in the 1990’s. However, in

39
general, most of these studies covered developed nations. The

famous seminal research by Solow, on the contribution of

technology on productivity growth in the US sparked great

interest among scholars on the relationship between

information and communication technology and economic

growth of developed countries, especially in the US.

Several Asian countries, namely Singapore, Japan, Korea and

Taiwan (the Asian Tigers) have also benefited from ICT

development. According to Dunt and Harper, (2002),

investment in ICT has contributed positively to labour

productivity in Australia. Lau and Tokutsu, (1992), examine

the relationship between ICT and economic growth in the US

over the period 1960 to 1990 using the production function

approach; they found that ICT had contributed nearly half of

the national output during the study period. Kraemer and

Dedrick (1994), examine the impact of ICT on eleven Asian-

Pacific countries for the period of 1983 to 1990. Again, using

the production function approach, they found a significant

positive relationship between ICT and economic growth

particularly in countries that have invested heavily on ICT,

such as Singapore, Japan and Korea.

40
Niininen, P, (1998), estimates the contribution of ICT to

Finland’s economic growth over the period of 1983 to 1996

using the growth accounting framework, the empirical study

results showed that compared to other factors, ICT stood out

as a greater influence on economic growth in Finland. Daveri,

F, (2000), examines the contribution of ICT on economic

growth in eleven OECD – (Organisation of Economic Co-

operation and Development) countries, using the growth

accounting framework, the author found that ICT contributed

significantly to economic growth of most OECD countries

especially during the mid 1990’s and concluded that all the

sampled OECD countries gained economically from ICT

investment over the years. Again, using the growth accounting

framework, Oulton, (2001), examines the contribution of ICT to

economic growth in UK over the years 1989 to 1998, the

empirical results highlight that ICT had contributed

significantly to economic growth in the UK, especially from

1994 to 1998. Colecchia and Schreyer, (2002), estimate the

contribution of ICT in output growth in nine OECD countries

over the period 1980 to 2000. The empirical results show that

ICT contributed between 20% and 50% of the national output

41
growth over the study period in most countries which later

increased to 30% to 90% per annum in mid 1990,s.

Piatkowski, M. (2003), investigates the impact of ICT on

economic growth in Poland over the period 1995 to 2000,

using the growth accounting framework. This study found out

that ICT investment contributed nearly 9% of Poland’s

economic growth during the sampled period. Mas and

Quesada, (2005), used data on ICT investment and examine

its contribution to economic growth in Spain from 1985 to

2002. Their results show that ICT had a strong impact in the

intensive ICT-using sector compared to other sectors.

Information technology (IT) is the automation of processes,

controls, and information production, using computers,

telecommunications, software and ancillary equipments such

as Automated Teller Machines (ATM) and debit cards (Khalifa,

2000). It is a term that generally covers the harnessing of

electronic technology for the information needs of a business

at all levels. Irechukwu (2000) lists some banking services that

have been revolutionalised through the use of ICT as account

opening, customer account mandate and transaction

42
processing and recording. Information and communication

technology has provided self-service facilities from where

prospective customers can complete their account opening

documents direct on-line. It assists customers validate their

accounts numbers and receive instruction on when and how to

collect their cheque books, credit cards and debit cards.

Communication technology deals with the physical device and

software that link various computer hardware components and

transfer data from one physical location to another (Laudon

and Laudon, 2001).

ICT products in use in the banking industry include Automated

Teller Machine (ATM), Smart cards, Telephone Banking, MICR,

Electronic Fund Transfer (EFT), Electronic Data Interchange,

Electronic Home banking. Several authors have conducted

investigations on the impact of ICT on the banking sector of

the Nigerian economy. Agboola et al (2002) discussed the

dimensions in which automation in the banking sector

manifest in Nigeria as follows:

1. Bankers’ Automated Clearing Services: This involves the

use of Magnetic Ink Character Reader (MICR) for cheque

43
 processing. It is capable of encoding, reading and sorting

cheque.

2. Automated Payment systems: devices used here include

Automated Teller Machine (ATM), plastic cards and

electronic fund transfer (EFT)

3. Automated Delivery Channels: these include interactive

television and the internet.

Agboola (2001) studied the impact of computer automation on

the banking services in Lagos and discovered that electronic

banking has tremendously improved the services of some

banks to their customers in Lagos. The study was however

restricted to the commercial nerve centre of Nigeria and

concentrated only on six banks. He made a comparative

analysis between the old and new generation banks and

discovered variation in their rate of adoption of the automated

devices. Aragba-Akpore (1998) wrote on the application of

information technology in Nigerian banks and pointed out that

IT is becoming the backbone of banking services regeneration.

He cited the Diamond Integrated Banking Services (DIBS) of

Diamond Bank Limited and Electronic Smart Card Account

(ESCA) of All States Bank Limited as efforts geared towards

44
creating sophistication in the banking sector. Ovia, (2000)

discovered that banking in Nigeria has increasingly depended

on the deployment of information and communication

technology (ICT) and that IT budget for banking is by far larger

than that of any other industry in Nigeria. He contends that

on-line system has facilitated internet banking in Nigeria as

evidenced in some of them launching websites. He found also

that banks now offer customers the flexibility of operating

their accounts in any branch irrespective of which branch the

account is domiciled.

Woherem (1997) discovered that Nigerian banks since 1980s

have performed better in their investment profile and use of

ICT systems than the rest of the industrial sectors of the

economy. An analysis of the study carried out by African

Development Consulting Group Limited (ADCG) on IT diffusion

in Nigeria shows that banks have invested more on IT, absorb

more personnel, increase installed base for PCs, LANs and

WANs and installed a better linkage to the internet than other

sectors of the Nigerian economy. The study however pointed

out that while most of the banks in the West and other parts of

the world have at least one PC per staff, Nigerian banks are

45
lagging seriously behind, with only a PC per capita ratio of

0.18 (Woherem 2000). Some payments are now automated

and absolute volume of paper transactions have declined

under the impact of electronic transaction brought about by

the application of ICT to the payment system in Nigeria (David,

Frazer, 1985).

The adoption of ICT has influenced the content and quality of

banking operations. From all indications, ICT presents great

potential for business process re-engineering of Nigerian

banks. Investment in information and communication

technology (ICT) should form an important component in the

overall strategy of banking operators to ensure effective

performance. It is imperative for banks management to

intensify investment in ICT products in order to facilitate

speed, convenience and accurate services or lose out to their

competitors. The banking industry in Nigeria presents ICT

providers with great opportunities to market their innovations.

Success in this area however depends on how they can

customize their services to appreciate the ready minds of

various stakeholders in the industry.

46
3.2 TELE-COMMUNICATION AND ECONOMIC DEVELOPMENT
In the past, capital, labour and raw materials were regarded as

the critical ingredients for productivity. Today information

technology is not only regarded as the fourth factor of

production, it seems destined to progressively reduce the

relative significance of the first three, (Ras-work, 1995).

Through ICT, it is now possible for one country to provide

capital, but use the labour and raw materials of another

regardless of distance.

In order to survive in the highly competitive world of today, in

which countries and companies are struggling to acquire new

businesses and financial strength, either to maintain or

improve market share in the international and local business

milieu, it is important for them to wire up themselves in

readiness for the traffic of information technology that have

now become the fourth factor of production (Gates, 1995). For

countries to have worldwide connectivity, it is vital that they

set up the infrastructure that would facilitate inter and intra-

company communications. The free flow of information within

47
and between countries and organizations is critical to

competitive advantage.

Woherem, (1992) looked at factors that cause change and

concluded that telecommunication has become an agent of

change and that it is a major force ushering in the “global

village”. He also commented that it is a major contributor to

democratization of countries, deregulation of industries,

privatization, networking of groups and companies and the

development and distribution of information and ideas. He

went on by saying that while the rest of the world is being

daily connected through arteries of information and

communication channels using satellites, land and sea cables

and in the process sharing vast amount of data, Nigeria’s

rudimentary IT infrastructure and resources virtually excluded

her of this new revolution. Therefore, competitive wise, Nigeria

is not there yet. Since the 1980s, it has been increasingly

realized that telecommunication is not a luxury but a pre-

requisite for the rapid development of third world countries.

The internet is responsible for this realization. In the word of

Toffer, (1990), the internet has been growing exponentially

since early 1990s and now has an estimated 160 Million users

48
worldwide. It has become the fastest, cheapest and

increasingly the most preferred method of communication in

the developed world.

As pointed out earlier, telecommunication is powering the new

post-industrial information age; it is increasingly making

information a major ingredient in production. It is creating a

new type of world economy by making the small businesses as

powerful as the big one through access to and the use of

appropriate information technology. It provides the

infrastructure that every enterprise or country requires in

order to participate and compete in the new global economy.

According to Woherem, (1993), all organizations and

economies need the infrastructure in order to participate in

global interconnectivity of businesses and finance of every

kind. He explored the impact of ICT on integration and

concluded that in order for African companies to produce more

and increase their market share within and outside the

continent, they need to acquire ICT. Lack of appropriate ICT is

one reason Nigeria has not achieved its Millennium

Development Goals (MDGs) and regional integration. There is

need to communicate effectively with each other thereby

49
 building the trust that will enhance trading, travels, tourism

and economic integration.

The relationship between ICT and economic development has

been a subject of many international studies (Ejo-Orisa, 1997,

Frenzel, 1996, Gates, 1995, Glastonbury, 1992, Naisbilt, 1994

and Woherem, 1995). Although findings of the studies differ in

the exact degree to which they assert that telecommunication

contribute to economic growth, their findings suggest a close

positive relationship between them. The studies show that

investment in telecommunications brings higher social and

economic rewards to low-income countries than high-income

countries at least in terms of benefits for every Dollar spent.

These findings should be taken very seriously by developing

countries like Nigeria in deciding the degree of priority placed

on telecommunications in its national development plans.

According to Maitland Commission Report, an improvement in

telecommunications in a country does not arise from economic

development; quite the contrary. Economic development is now

the function of the level of telecommunication infrastructure

possessed by a country. Naisbilt, (1994) reflecting on the

correlation between telecommunication and economic

50
 development opined that along with privatization and

education, nothing can contribute more to a developing

country’s economic well-being than a state-of-the-art

telecommunication infrastructure.

Most of Nigeria’s roads are bad and do not promote fast and

safe communication. The postal system is epileptic, making it

frustrating for people to send and receive documentary

information from different parts of the country and the rest of

the world. There is an acute shortage of appropriate information

and database in Africa. Access to the internet would help

Nigeria to receive information from databases and information

systems, and promote intra-African information sharing, as well

as enable outsiders have appropriate information on the

country’s businesses, culture, people, successes and problems.

This may seem utopian, but it is seen to be the future direction

of trade and inter-organisational communication.

3.3 TELE-COMMUNICATION INFRASTRUCTURE IN NIGERIA:

PROBLEMS AND PROSPECTS
As we dash into what Toffer (1990) calls terra incognita, that is

the next Millennium, how ready is Nigeria to participate in

that indistinct future; a future where electronic networks

51
would be domineering (Roth, 1998) Most of the business and

people in Nigeria want to be part of the emerging worldwide

information revolution. Nevertheless, the reality on ground is

that the country is not really prepared for the information

revolution of the 21st Century. It does not have the enabling

infrastructure, and it does not seem to be taking the

necessary action. The telecommunication infrastructure

needed to capture, store and transfer voice, text, numerical

and multi-media data is woefully short in Nigeria. The per

capita telephone line of the country is one of the lowest in the

world. Nigeria thus, needs urgent development of modern

telecommunication infrastructure in order to be able to

participate in most of the trades and discourses of the 21st

Century. Woherem, 2001) concluded Nigeria must modernize

its information technologies in order to achieve sustainable

development. Contributing to the same topic, O’ Reilly, (1997)

assert that for a country to benefit from ICT breakthroughs, it

must have efficient telecommunication infrastructure in place.

It has been observed that in Africa capacity building and policy

incentive is lacking, on the other hand it has been suggested

that the long-run growth witnessed by East Asian economies

52
has been a sustained increase in firm-level productivity

traceable to continuous build up of technological capability

(Biggs et al, 1995). Also, an analysis of Africa’s capacity

building problems and challenges has shown that the capacity

to manage in both private and public sectors is grossly

inadequate. The result is an ineffective public service reflected

in poorly-designed and managed infrastructures-telecoms,

roads, water, and sewage systems, etc (Thohlane, 1996). The

studies also showed that while most governments of Sub-

Saharan Africa sought to improve the situation through donor

technical assistance, this approach did little to improve the

efficiency or honesty of government substantially and has not

succeeded in building much management capacity within or

outside the governments. The approach only resulted in

replacing the indigenous African capacity and demoralizing

public administration (Bergi, 1993). What is needed according

to this observation is internalizing capacity building on which

to build in order to improve institutional and economic

development of the continent. Generally, technical assistance

has a role to play. It should focus on direct support of capacity

building and institutional development within a realizable time

53
 frame, allowing efficient technical learning and absorption on

the part of the recipient (Labelle, 1995).

3.4 THEORETICAL FRAMEWORK

The positive externalities engendered by investment in

technologies have been analysed by the following endogenous

growth model.

3.5 ROMER’S MODEL OF TECHNOLOGICAL CHANGE

Romer’s model of technical change of 1990 highlights

sustained growth by assuming that technological change is

the unintended results of specializing firms’ investments. To

Romer, ideas are more important than natural resources. In

Romer’s model, new knowledge enters into production in three

ways. A new design is used in the intermediate goods sector

for the production of intermediate input. In the financial

sector, labour, human capital and available producer durables

to produce the final product. A new design increases the stock

of knowledge which increases the productivity of human

capital employed in research sector. This corroborates with

Galbraith’s assertion that, we now get the larger part of our

54
industrial growth, not from more capital investment, but from

investment in men brought about by improved men.

ASSUMPTIONS OF THE MODEL

- economic growth comes from technological change

- technological change is endogenous

- market incentives play an important role in making

technological change available to the economy

- invention of a new design requires a specified amount of

human capital

- the aggregate supply of human capital is fixed

- knowledge or a new design is assumed to be partially

excludable and retainable by the firm which invented the

new design

- technology is a non-rivalry input

- it is assumed that the low cost of using existing design

reduces the cost of creating new designs

Romer’s production function is given as:

∆A = F (KA, HA, A)

55
Where, ∆A is the increasing technology, KA is the amount of

capital invested in producing the new design (or technology),

HA is the amount human capital (labour) employed in Research

an Development (R &D) of the new design, A is the existing

technology of designs. F is the production function for

technology.

The above production function shows that technology is

endogenous when more human capital is employed for

Research & development (R & D) of new designs

The model suggests that, new knowledge (technology) is the

ultimate determinant of long-run growth which is determined

by investment in research technology. According to Romer, it

is spillovers from research efforts by a firm that leads to the

creation of new technology by other firms. In other words, new

research technology by a firm spills over instantly across the

entire economy. Also, a study by King and Robinson shows

that innovation in one sector of the economy has a contagion

or demonstration effect on the productivity of other sectors,

thereby leading to economic growth.

56
 CHAPTER FOUR

RESEARCH METHODOLOGY AND EMPIRICAL ANALYSIS

4.1. INTRODUCTION

Information and communication sector is presumed to provide

new opportunities and frontiers across businesses, social,

economic and political settings. That is, the revolution that

accompanied the liberalization of the Nigerian

telecommunication sector provided new means of addressing

people’s basic needs and also enriching the lives of people

and businesses in unprecedented ways. It thus, implies that an

improvement in infrastructure and facilities of

telecommunications will have a considerable impact on the

banking sector. This chapter will focus on the trend analysis of

the impact of ICT on banking industry as well as the degree of

ICT influence on the sector. It is generally believed that the

use of ICT has re-shaped the competitive scenario of the

Nigerian banking industry.

4.2 IDENTIFICATION OF MAJOR INDICATORS (VARIABLES)

57
 The indicators used to analyse major findings of this research

are mobile and fixed telephone lines, growth in loans and

advances of Intercontinental Bank Plc, growth in bank deposits

of Intercontinental Bank Plc, and growth in the bank’s

profitability (PAT). This is done in order to ascertain the

impacts of ICT on banking industry.

4.3 MODEL SPECIFICATION OF ICT & INTERCONTINENTAL

BANK’S PERFORMANCE

PERFORMANCE
INDICATORS
LOANS &

BANKS’
ADVANCES
ICT SYSTEMS

FIXED
TELEPHONE
LINES
CUSTOMER’S
DEPOSITS

MOBILE PHONE PROFIT

The model
LINES above indicates that growth in ICT systems is
BEFORE TAX

(PAT)
expected to lead to growth in Intercontinental Bank’s Loans &

Advances, Customers’ Deposits and Profitability.

4.4 ANALYSIS OF THE MODEL

58
 Due to constraints imposed by unavailability of secondary

data on ICT variables, the analysis was based on three

aspects:

a. A Comparative Analysis between the growth rate of fixed

telephone and mobile phone lines between 1995 and 2008

b. A Trend Analysis of the growth rate of Intercontinental Bank

Plc within the period of 2003-2008 with respect to growth in

ICT.

c. The actual effect of the volumes of fixed telephone and

mobile phone lines between 2003 and 2008 on the

performance of Intercontinental Bank Plc in terms of growth

in Loans and Advances, Customers’ Deposits and Profit

After Tax.

4.5 PRESENTATION OF DATA AND ANALYSIS

59
 Table 4.51: Fixed/Mobile Phone Lines Subscribers
Before/After GSM Liberalization
Year Fixed % ∆ in Mobile % ∆ in
Telephone Fixed Lines Mobile
Lines telephone Lines
Lines
1995 405,073 - 13,000 -
1996 405,073 0.0% 13,000 0.0%
1997 415,400 2.5% 18,000 38.5%
1998 415,400 0.0% 18,000 0.0%
1999 473,316 13.9% 35,000 94.4%
2000 553,374 16.9% 35,000 0.0%
2001 600,321 8.5% 266,461 661.3%
2002 702,000 16.9% 1,569,050 488.8%
2003 850,000 21.1% 3,100,000 97.6%
2004 1,120,000 31.8% 9,200,000 196.8%
2005 1,223,258 9.2% 18,587,00 102.0%
0
2006 1,563,028 27.8% 32,325,78 73.9%
5
2007 1,579,664 1.1% 40,395,61 24.9%
1
2008 1,879,495 18.9% 57,608,87 42.6%
7
Source: National Communication Commission (NCC) &
International Telecommunication Network (ITN)

60
Figure 4.51:

60,000,000

From the above analysis in Table 4.51, the higher the number

of telephone lines (fixed & mobile), the more likely there will

50,000,000
be improvements on the banks’ performance. The figure

above highlights the poor state of telecommunication (ICT)

infrastructure in Nigeria before and after the advent of GSM.

For example, in 1995, a mere 405,073 fixed lines and 13,000

mobile lines were available, these grew to 600,321 in 2001,

representing a growth rate of 8.5% from 2000 after the

introduction of GSM. However, by the end of 2002, fixed

telephone lines and mobile phone lines had increased to

40,000,000 61
 702,000 and 1,569,050 respectively. There was improvement

in banking services with the telecommunication sector

liberalization in 2001, both fixed and mobile lines increased

rapidly. Also, with fixed telephone lines of 1,579,664 and

mobile lines of 40,395,611 in 2007, it grew to 1,879,495 and

57,608,877 in 2008 corresponding to a growth of 18.9% and

42.6% respectively.

4.6 TREND ANALYSIS: GROWTH IN LOANS & ADVANCES OF

INTERCONTINENTAL BANK PLC
Table 4.61
Year Loans & % ∆ in Fixed % ∆ in Mobile % ∆ in
Advances fixed Mobile
Nm Growth Telephone phone phone Lines phone lines
Lines lines

2003 12,602 - 850,000 21.1% 3,100,000 97.6%

2004 21,653 71.8% 1,120,000 31.8% 9,200,000 196.8%

2005 52,598 142.9% 1,223,258 9.2% 18,587,000 102.0%

2006 161,357 206.8% 1,563,028 27.8% 32,325,785 73.9%

2007 262,536 62.7% 1,579,664 1.1% 40,395,611 24.9%

2008 435,457 65.9% 1,879,495 18.9% 57,608,877 42.6%

Source: Company Annuals; Stanbic IBTC Research & National

Communication Commission (NCC) & International
Telecommunication Network (ITN)

62
Figure 4.52:

500,000

The advent of GSM in early 2000, with the banking industry

450,000
harnessing its full benefits in 2003 has

competitive advantage to banks in terms of the number of

engendered

computers, the level of PC networks in use and the level of

telecommunication infrastructure. Hence, from table 4.61,

Intercontinental Bank’s Loans and Advances to customers

400,000
increased from 12,602 in 2003 to 21,653 in 2004, representing

a growth rate of 71.8%. Within the same period, the number

of fixed telephone lines and mobile phone lines increased from

850,000 and 3,100,000 in 2003 to 1,120,000 and 9,200,000 in

63

350,000
 2004, corresponding to a growth rate of 31.8% and 196.8%.

whereas. Fixed and Mobile phone lines also increased from

1,579,664 and 40,395,611 in 2007 to 1,879,495 and

57,608,877; representing a growth rate of 18.9% and 42.6%

respectively. Within the same period, Intercontinental Bank’s

Loans & Advances increased from 262,536 in 2007 to 435,457

10 2008; this amounts to a growth rate of 65.9%. The bank’s

operating system was improved upon in order to achieve this

performance.

4.7 GROWTH IN DEPOSITS OF INTERCONTINENTAL BANK

PLC
Table 4.71: Intercontinental Banks Total Deposits

Year Deposits %∆ Fixed % ∆ Fixed Mobile %∆

(Nm) Deposits phone lines mobile
Telephone phone phone
Lines Lines lines

2003 35,584 - 850,000 21.1% 3,100,000 97.6%

2004 50,244 41.2% 1,120,000 31.8% 9,200,000 196.8%

2005 110,013 118.9% 1,223,258 9.2% 18,587,000 102.0%

2006 252,280 129.3% 1,563,028 27.8% 32,325,785 73.9%

2007 467,933 85.5% 1,579,664 1.1% 40,395,611 24.9%

2008 1,057,079 125.9% 1,879,495 18.9% 57,608,877 42.6%

Source: Company Annuals; Stanbic IBTC Research & National

Communication Commission (NCC) & International
Telecommunication Network (ITN)

64
Figure 4.71:

1,200,000

In table 4.71, whereas the number of fixed telephone lines

increased from 850,000 in 2003 to 1,120,000 in 2004, a
growth rate of 31.8%%; mobile phone lines also increased
from 3,100,000 in 2003 to 9,200,000 in 2004; representing a
growth rate of 31.8% and 196.8% respectively, the deposit
base of Intercontinental Bank Plc increased from 35,584 in
1,000,000
2003 to 50,244 in 2004, growth rate of 41.2% % during the
same period under review. These performances were due to
65
 flexible savings accounts operated with the best ICT available
manned by well-trained personnel. Again, the operating model
in Intercontinental Bank Plc is structured around the client.
Again, in 2008, Intercontinental Bank’s Deposits increased to
1,057,079 from 467,933 in 2007, this corresponds to a growth
rate of 125.9%. Within the same period, Fixed and mobile
telephone lines increased from 1,579,664 and 40,395,611 to
1,879,495 and 57,608,877 representing a growth rate of
18.9% and 42.6 respectively. This agrees with our initial
hypothesis that growth in Intercontinental Bank performance
is dependent on ICT.

4.8 GROWTH IN PROFIT AFTER TAX (PAT) OF

INTERCONTINENTAL BANK PLC
Table 4.81: Intercontinental Banks Profit After Tax (PAT)

Year PAT % ∆ in Fixed % ∆ in Mobile % ∆ in mobile

(Nm) PAT Fixed phone lines
Telephone telephone phone Lines
Lines lines

2003 1,878 0.0% 850,000 21.1% 3,100,000 97.6%

2004 2,569 36.8% 1,120,000 31.8% 9,200,000 196.8%

2005 5,023 95.5% 1,223,258 9.2% 18,587,000 102.0%

2006 7,215 30.4% 1,563,028 27.8% 32,325,785 73.9%

2007 15,120 109.6% 1,579,664 1.1% 40,395,611 24.9%

2008 34,773 129.9% 1,879,495 18.9% 57,608,877 42.6%

Source: Company Annuals; Stanbic IBTC Research & National

Communication Commission (NCC) & International
Telecommunication Network (ITN)

66
Figure 4.71:

40,000

Adoption of ICT has influenced the content and quality of

banking operations. From all indications, ICT presents great

35,000
potential for business process re-engineering of the Nigerian

banks. ICT enabled accurate records, enhances convenient

business hour, facilitates prompt and fair attention, and

promotes faster services and availability of home and office

banking services. Also, customers are happy with great

improvement on bank statement generation, account

30,000
reconciliation and balance enquiry. This factor brought about

increased performance and profitability to banks. From table

67
 4.81 above, Intercontinental Bank’s profit after tax (PAT)

increased from 1,878 in 2003 to 2,569 in 2004. Likewise, in

2006, it was 7,215 and the highest PAT of 34,773 was attained

in 2008. This represents a growth rate of 129.9% from 2007

respectively. Also, fixed telephone and mobile phone lines

increased from 1,579,664 and 40,395,611 in 2007 to

1,879,495 and 57,608,877 in 2008 corresponding to a growth

rate of 18.9% and 42.6% respectively.

4.9 RESEARCH FINDINGS

This study revealed that the period between 1990 to 2008 was

characterized by fundamental changes in the content and

quality of banking business in Nigeria. Information and

Communication Technology (ICT) was identified as the main

driving force. The adoption of ICT directly affects how

managers decide, plan and what products and services are

offered to the banking public.

This study also revealed that Nigerians and Nigerian banks

have responded to this new revolution.

Intercontinental Bank Plc has witnessed tremendous changes

and performance linked with the developments of ICT over the

68
 years. Although, the advent of GSM has increased

competitiveness in the banking industry, however, adequate

capacity is lacking as a result of inadequate

telecommunication infrastructure.

4.10 IMPLICATION OF FINDINGS

Although Information and Communication Technology (ICT)

has improved the speed and efficiency of banking operations

particularly routine banking transactions and the nature of

services provided to customers. However, ICT fraud has

become a major threat to the system. Security of information

was found to be very vulnerable in general.

For Nigerian banks to compete globally, given the rapid

globalization of businesses and commerce, there is need to

invest a lot more on ICT, both in terms of installed base,

staffing and training of IT staff.

The Nigerian government needs to look into the daunting

challenges facing the telecommunication sector. That is,

government should formulate ICT-friendly policies that would

provide enabling environment for ICT services to thrive.

CHAPTER FIVE
69
 SUMMARY, CONCLUSION AND RECOMMENDATION

5.1 SUMMARY

In this research project, it has been fairly established that

computers and telecommunication systems have become very

important as delivery systems and productivity tools of

electronic data and information. The findings suggest that

Nigerian banks have invested more on ICT, have more IT

personnel, have more installed base per PC, LANs, WANs and a

better linkage to the internet than before. As a result of these,

ICT has influenced the content and quality of banking

operations especially with Intercontinental Bank Plc as

demonstrated in the analysis carried out.

However, the mere possession of ICT no longer confers any

special advantage; what distinguishes a leading bank from a

laggard one is the way and speed with which technology is

applied to deliver superior customer services. Banks need to

employ a lot of creativity and the appropriate compliments of

strategies, business processes, people and technology in a

sufficiently elastic manner in order to improve corporate

image, increase profitability, reduce costs while also pursuing

70
 real growth. Moreover, another factor that may influence the

extent to which ICT enables productivity and growth is the

complementarity between ICT capital and skills.

Finally, it was also observed that, the greatest obstacle to

Nigerian banks from delivering world-class ICT services is the

poor state of the country’s telecommunication infrastructure.

5.2 CONCLUSION

The study has dealt with the impact of information and

communication technology (ICT) on the Nigerian banking

industry with special focus on Intercontinental Bank Plc. The

study revealed that ICT has had appreciable positive effects

on the banking profitability, customers’ patronage, service

delivery, customer services and general banking transactions.

These affect the growth of banking industry in Nigeria

positively because customers can now access their accounts

from any branch irrespective of where the account is

domiciled. Also, the introduction of ATMs has reduced the

volume of cash carried by customers.

71
 It is also revealed that telephones, computer systems, LANs,

and Facsimile services are available in nearly all banks using

ICT in Nigeria.

Also, epileptic power supply and inadequate

telecommunication infrastructure were identified as the major

culprits in way of ICT adoption and utilization in Nigerian

banking industry. On this note, government should provide

enabling and supportive environment for ICT to thrive in

Nigerian banking industry.

5.3 RECOMMENDATIONS

It has been explicitly observed that the banking industry has

demonstrated a fair amount of competence in the application

of ICT; some banks were at the cutting edge of ICT and have a

clear vision of how ICT could be further applied successfully.

Banks have spent millions of Naira on ICT every year in a bid

to fully automate its operations and services to customers.

The industry recognizes that ICT was a major key to its

development.

72
In order to fully harness the increasingly returns and network

externalities of ICT, the banking industry needs to better apply

ICT to improve its operations, customer services and products.

Banks should devote more resources to development of

secure ICT systems, services and products. Also, the future

impact of outsourcing ICT procurement should be thoroughly

evaluated because the long term effect may be very

expensive.

The research also brought to light, the fact that ICT has

increased competition within the industry. The realization that

the market size is not really increasing has made banks more

competitive. Also, the expectation of their customers is very

high and in response, banks use ICT to satisfy the demand for

quality services and products. However, the business

environment has not been supportive; deregulation and re-

capitalization of the industry has even made their marketing

strategy become more aggressive. Finally, the poor state of

the nation’s telecommunication infrastructure should be

addressed.

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