Project – Effect of Digital currencies on non-financial performance of listed commercial banks in Nigeria

CHAPTER ONE

INTRODUCTION

• Background to the Study

Digital currencies, also known as cryptocurrencies, have been a topic of interest in the financial sector for the past decade. In Nigeria, the impact of these digital currencies on the non-financial performance of listed commercial banks has been a subject of considerable debate. A study by Eze and Gbandi (2018) found that the adoption of digital currencies has led to increased efficiency in the operations of commercial banks. The study further revealed that digital currencies have reduced the cost of transactions, thereby improving the overall customer experience.

However, there are also concerns about the potential risks associated with digital currencies. A report by the Central Bank of Nigeria (2019) highlighted the potential for digital currencies to facilitate money laundering and other illicit financial activities. This has led to increased regulatory scrutiny, which could potentially impact the reputation of commercial banks. The report further noted that the volatility of digital currencies could pose a risk to the stability of the banking sector.

Despite these concerns, some studies have found positive effects of digital currencies on the non-financial performance of commercial banks. For instance, a study by Ogunleye and Iyoha (2020) found that the use of digital currencies has improved the speed and convenience of transactions, leading to increased customer satisfaction. The study also found that digital currencies have enabled banks to offer innovative products and services, thereby enhancing their competitive advantage.

On the other hand, a study by Akinola and Adekunle (2021) found that the adoption of digital currencies has not significantly impacted the non-financial performance of commercial banks in Nigeria. The study suggested that this could be due to the low level of awareness and understanding of digital currencies among the general public. The study recommended that banks should invest in customer education to increase the adoption of digital currencies.

The effect of digital currencies on the non-financial performance of listed commercial banks in Nigeria is a complex issue. While some studies have found positive effects, others have highlighted potential risks and challenges. Further research is needed to fully understand the implications of digital currencies for the banking sector in Nigeria.

• Statement of the Problem

The advent of digital currencies, such as Bitcoin, Ethereum, and others, has significantly altered the financial landscape globally. In Nigeria, the impact of these digital currencies on the non-financial performance of listed commercial banks is a critical issue that needs to be addressed. The problem is that there is a lack of comprehensive research on how digital currencies affect the non-financial performance of these banks (Adegbite, 2020).

The non-financial performance of banks includes aspects such as customer satisfaction, brand reputation, and employee satisfaction. With the increasing popularity of digital currencies, there is a concern that these may negatively impact these non-financial aspects. For instance, the volatility and unpredictability of digital currencies may lead to customer dissatisfaction and a tarnished brand reputation (Oyewole, 2019).

Furthermore, the use of digital currencies may also lead to a decrease in the use of traditional banking services, which could negatively impact the banks’ non-financial performance. This is because customers may prefer the convenience and anonymity provided by digital currencies over traditional banking services (Adeyemi, 2020).

Moreover, the lack of regulation and control over digital currencies may pose a threat to the stability and security of the banking sector. This could lead to a decrease in customer trust and confidence in the banks, thereby affecting their non-financial performance (Oyedele, 2021).

However, there is also a possibility that digital currencies could positively impact the non-financial performance of banks. For instance, banks that embrace digital currencies and integrate them into their services may be seen as innovative and forward-thinking, which could enhance their brand reputation (Adeyemi, 2020).

The effect of digital currencies on the non-financial performance of listed commercial banks in Nigeria is a complex issue that requires further research. The current lack of comprehensive studies on this topic highlights the need for more in-depth investigations to fully understand the implications of digital currencies on the banking sector (Adegbite, 2020).

• Aim and Objectives of the Study

The aim of the study is to examine the Effect of Digital currencies on non-financial performance of listed commercial banks in Nigeria. The specific objectives:

1. To examine the impact of digital currencies on the operational efficiency of listed commercial banks in Nigeria.
2. To investigate the influence of digital currencies on the customer satisfaction level in listed commercial banks in Nigeria.
3. To assess the effect of digital currencies on the innovation and technological advancement of listed commercial banks in Nigeria.
4. To evaluate the role of digital currencies in the risk management practices of listed commercial banks in Nigeria.

1.4  Research Questions

The research questions are buttressed below:

1. How does the impact of digital currencies affect the operational efficiency of listed commercial banks in Nigeria?
2. What is the influence of digital currencies on the customer satisfaction level in listed commercial banks in Nigeria?
3. In what ways do digital currencies affect the innovation and technological advancement of listed commercial banks in Nigeria?
4. How does the role of digital currencies play in the risk management practices of listed commercial banks in Nigeria?

• Research Hypothesis

The hypothetical statement of the study is buttressed below:

Ho: Digital currencies has no significant impact on the operational efficiency of listed commercial banks in Nigeria

H1: Digital currencies has significant impact on the operational efficiency of listed commercial banks in Nigeria

• Significance of the Study

The study of the effect of digital currencies on the non-financial performance of listed commercial banks in Nigeria holds significant importance in several ways. Firstly, it provides an in-depth understanding of the influence of digital currencies on the operational efficiency of these banks. As digital currencies continue to gain popularity, it is crucial for banks to understand how these currencies can affect their operations and what strategies they can employ to maximize their efficiency.

Secondly, this study sheds light on the impact of digital currencies on customer satisfaction levels. With the increasing use of digital currencies, customer expectations and satisfaction levels are likely to change. This study can help banks in Nigeria to understand these changes and adapt their services accordingly to meet the evolving needs of their customers.

Thirdly, the study explores the role of digital currencies in driving innovation and technological advancement in the banking sector. The findings from this study can guide banks in leveraging digital currencies to foster innovation and stay competitive in the rapidly evolving financial landscape.

Fourthly, the study assesses the role of digital currencies in risk management practices. As digital currencies introduce new types of risks, understanding their implications can help banks to develop effective risk management strategies.

Fifthly, the study contributes to the existing body of knowledge on digital currencies and their impact on the banking sector. It provides empirical evidence from the Nigerian context, which can be useful for researchers and policymakers in other developing countries.

Lastly, the findings of this study can inform regulatory policies related to digital currencies in Nigeria. By understanding the implications of digital currencies on the banking sector, policymakers can develop regulations that promote the healthy integration of digital currencies into the financial system while mitigating potential risks.

1.7. Scope of the Study

The study examines the effect of Digital currencies on non-financial performance of listed commercial banks in Nigeria. The study is limited to selected banks in Nigerian stock exchange.

1.8. Operational Definition of Terms

1. Effect: This term generally refers to the result or outcome of a particular action or event. It’s the change that is directly caused by an action or cause.

2. Digital Currencies: These are types of currency available in digital form. It exhibits properties similar to physical currencies, but allows for instantaneous transactions and borderless transfer-of-ownership. Examples include cryptocurrencies like Bitcoin, Ethereum, and Ripple.

3. Non-financial: This term is often used to describe entities, transactions, or information that are not related to financial activities. For example, non-financial corporations are those whose primary business is not related to financial activities, such as manufacturing or service industries. Non-financial information might include data about a company’s environmental impact or employee satisfaction.

5. Performance: This term refers to the act of performing or accomplishing a task or function. In a business context, it often refers to how well a company, employee, or product is doing in terms of productivity, efficiency, profitability, or other measures.
6. Listed Commercial Banks: These are banks that are publicly traded on a stock exchange. Being listed means that the bank’s shares can be bought and sold by the public. Commercial banks are financial institutions that accept deposits, offer various banking services like loans and mortgages, and are involved in the creation of credit.

Project – Effect of Digital currencies on non-financial performance of listed commercial banks in Nigeria