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.

Todays business environment is very dynamic and undergoes

rapid

changes

as

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
changing
climate.

and

competitive

conditions
In

view

of

and

environment
highly

the

characterized

unpredictable

foregoing,

the

by

economic

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

1.4 RESEARCH QUESTIONS

-

What effect has the use of ICT systems like Telephone,

VSAT,

MICR,

ATM,

Computers

etc

have

on

Intercontinental Banks 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 Banks 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

increased its productivity

Bank

Plc

has

bank has

not

HYPOTHESIS 2
H0:

Adoption of ICT by Intercontinental

improved customers patronage

HA:

Adoption of ICT by Intercontinental bank has improved

customers 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
independent on ICT

Banks

performance

is

HA:

Growth in Intercontinental
dependent on ICT

Banks

performance

is

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 Banks Performance) and lastly
2003-2008 (performance of Intercontinental Bank Plc)

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 firms 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 1990s; 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 banks
head office).

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

Recommendations.

of

findings,

Conclusions

&

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
technology

shows

that

information

(ICT)

affects

financial

and

communication

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 1980s to mid 1990s
was less than 2% compare to 10% in developed countries
during the same sampled period. The lower return from ICT in
developing

countries

infrastructure/enabling
development

in

the

is

attributed

environment
economy.

11

This

to
to

inadequate
support

problem

is

ICT

further

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 macroeconomic 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
IT staff

in Total
employmen
t
in
ICT
sector

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

Total
GDP
@
organizatio current
n budget in basic prices
ICT
investment
(Millions)

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 unapartheid 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
Nigerias 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 30s and 40s witnessed mushrooming of mainly undercapitalised

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 Patons 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), cardbased (credit/debit smart cards) communication-based (telebanking 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
Automated Teller Machine
(ATM)
Electronic Fund Transfer
(EFT)
Electronic Data Exchange
Smart Card
MICR Cheques
Local Area Network (LAN)
Wide Area Network (WAN)
Point of Sale System (POS)
Telephone Banking
Make cheque available
programme
Computerized credit rating
Daily calculation of
accounts programme

19901992
-

19931995
-

19961998
1

19992001
4

20022004
14

10

14

2
13
5
2
1

2
20
8
3
1
1

4
1
10
6
7
3
3
3

5
12
4
5
13
6
10
7

7
11
1
3
5
9
12
10

1
19

3
2

2
4

6
6

13
3

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 banks
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

technological focus is the personal computer.

20

of

banks

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

1980s,

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 online 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 upcountry 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 Interbank 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
segments

ATM

Volume volume

volume

Volume

2007

2008

2007

2008

15.7

60.1

399,712.6

(88.9)

(91.0)

131,562.
7

(90.5)

(88.5)
Web (Internet)

POS

Mobile

0.9

1.6

10,622.6

25,054.5

(5.1)

(2.4)

(7.1)

(5.7)

0.4

1.2

6,442.1

16,115.3

(2.4)

(1.8)

(4.3)

(3.7)

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
established

in

Merchant
response

Bank
to

the

Plc,

wholesale

growing

needs

bank
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 subsector. 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 iCash 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
relationship

through

market

management

segmentation,

(CRM),

product

customer
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

relationships
management,

building.
to

The

further

consumer

bank

develop

is

leveraging

competencies

in

insurance

and

finance,

these
asset
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

transformed

into

Limited
a

in

universal

Ghana

which

it

has

since

bank-intercontinental

Bank

Ghana with eight branches located at key commercial hubs in

Ghana. The banks 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 timeconsuming 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 Banks 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 front29

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 banks 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,

HRIS/Payroll,
proprietary

Banker80,

Mega-man,
software

Globus,

Phenix,

installed

in

including Intercontinental Bank Plc.

Flex
the

Bankos,
Cube

Pinacle

and

other

respondent

banks

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.

Customers account balance enquiry

iii.

Clients account maintenance (average balance)

iv.

Stopped

cheques

and

accounts

maintenance)
v.

Statement

vi.

Requests

vii.

Customers particulars maintenance

viii. Batch balance enquiry at closing time.

31

enquiries

(cheque

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

SYSTEMS

BANKER

MANAGEMENT

INFORMATION

The banks 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

mobilization
branches

and

spread

for

customers

customer
across

while

satisfaction.
Nigeria

and

driving
With
8

deposit

over
in

300

Ghana,

Intercontinental Bank Plc is one of the foremost provider of ebanking 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

banks broad customer base, and improved product range

coupled with considerable cross-selling potential has provided
a sustained boost to the banks 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
2003
2004
2005
2006
2007
2008

Amount (NGN)
35,584
50,244
110,013
252,280
467,933
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
2003

Amount (NGN)
12,602
35

2004
2005
2006
2007
2008

21,653
52,598
161,357
262,536
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

(ICT): ISSUES AND CONCEPTS

TECHNOLOGY

Todays business environment is very dynamic and undergoes

rapid

changes

as

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

unpredictable

these

changing

economic

conditions

climate.

and

highly

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
38

share

and

sustainable

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 1990s. 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.
investment

in

According
ICT

has

to

Dunt

contributed

and

Harper,

positively

to

(2002),
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 AsianPacific 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

Finlands 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 Cooperation 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 1990s 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 Polands
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
42

mandate

and

transaction

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 intracompany 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, Nigerias
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 prerequisite 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
50

and

economic

development

opined

that

along

with

privatization

and

education, nothing can contribute more to a developing

countrys

economic

well-being

than

state-of-the-art

telecommunication infrastructure.

Most of Nigerias 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
countrys 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 Africas 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 SubSaharan 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 ROMERS MODEL OF TECHNOLOGICAL CHANGE

Romers 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
Romers 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
Galbraiths 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
Romers 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

peoples 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 banks
profitability (PAT). This is done in order to ascertain the
impacts of ICT on banking industry.

LOANS &
ADVANCES
FIXED
TELEPHONE
LINES

BANKS
PERFORMANCE
INDICATORS

ICT SYSTEMS

4.3 MODEL SPECIFICATION OF ICT & INTERCONTINENTAL

BANKS PERFORMANCE

CUSTOMERS
DEPOSITS

PROFIT

MOBILE PHONE

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

expected to lead to growth in Intercontinental Banks 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
Telephone
Lines

in Mobile
Fixed
Lines
telephone
Lines

Mobile
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
0

102.0%

2006

1,563,028

27.8%

32,325,78
5

73.9%

2007

1,579,664

1.1%

40,395,61
1

24.9%

2008

1,879,495

18.9%

57,608,87
7

42.6%

Source:
National
Communication
Commission
International Telecommunication Network (ITN)

60

in

(NCC)

&

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
Advances
Growth
Nm

Fixed
Telephone
Lines

% in Mobile
fixed
phone Lines
phone
lines

in
Mobile
phone 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

engendered

competitive advantage to banks in terms of the number of

computers, the level of PC networks in use and the level of
telecommunication infrastructure. Hence, from table 4.61,
Intercontinental Banks 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

350,000

63

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 Banks
Loans & Advances increased from 262,536 in 2007 to 435,457
10 2008; this amounts to a growth rate of 65.9%. The banks
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
(Nm)

%
Deposits

Fixed

% Fixed
phone lines

Mobile
phone
Lines

%
mobile
phone
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%

Telephone
Lines

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 Banks 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
(Nm)

% in Fixed
PAT
Telephone
Lines

in Mobile
Fixed
phone Lines
telephone
lines

% in mobile
phone 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

30,000

generation,

account

reconciliation and balance enquiry. This factor brought about

increased performance and profitability to banks. From table
67

4.81 above, Intercontinental Banks 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

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 countrys 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 recapitalization of the industry has even made their marketing
strategy become more aggressive. Finally, the poor state of
the

nations

telecommunication

addressed.
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