DETERMINANTS OF BANK BRANCH NETWORKS IN NIGERIA: AN EXPLORATORY ANALYSIS

Abstract

Bank branches are established by deposit money banks based on different criteria. This study examined the determinants of bank branch networks in Nigeria. Varied determinants from empirical results across financial sectors around the world with similar operating environments with Nigeria were examined to identify the determinants of bank branch networks in Nigeria using the log-linear regression model and the Vector Error Correction Model (VECM) for both long- and short-run examinations of data on study variables from 1990 to 2021. Research results showed that aggregate savings, self-employment, literacy level, urbanisation, GDP per capita, number of performing business entities, market size of DMBs in the Nigerian financial system, and the percentage of the working class to total population positively determine the bank branch network in Nigeria, while total population, internet penetration, size of deposits, level of non-performing loans and aggregate disposable income negatively influence bank branch network in Nigeria in the long-run. The VECM value of -96.2% shows that 96.2% of identified anomalies in the short-run are not reversed in the long-run. This result necessitates the introduction of structural socio-economic, monetary and financial inclusion policies correction policies to eliminate obstacles to growth in bank branch networks to achieve growth in financial inclusion and boost economic activities with spiral positive effects on credit growth, production capacity expansion, growth in self-employment, aggregate savings, bank deposits, and overall economic growth.