Impact of Security Challenges on Bank Performance in Nigeria

Abstract

Economic stability is sustainable in a friendly and secure environment where lives and properties are guaranteed. Banks as providers of loans and advances to the productive sectors of the economy require a conducive, non- hostile economic and business environment for optimisation and maximisation of corporate objectives even so as the banking industry is a highly sensitive subsector. However, the challenge of insecurity across the country has posed a tremendous danger to the operations and business models of the banking institutions. This paper examines the impact of security challenges on the performance of banks in Nigeria, as business environment plays a significant role in the sustainability, profitability and growth of banking business globally. Bank performance is dependent on the level of security in the operating environment. The study evaluates the relationship between insecurity and bank performance. Federal Government security expenditures is taken as a proxy for security challenges and regressed with metrics of bank performance such as total assets, loans and advances, liquidity ratio and loans to deposit ratio by using partial least squares structural equation modelling (PLS- SEM). The study covers a period from 2000 to 2020 and the data were obtained the Central Bank of Nigeria Statistical Bulletin, National Bureau of Statistics, Nigeria Deposit Insurance Corporation and the Federal Budget office. The result reveals that insecurity has adverse impact on bank performance like other social and economic activities. The issue of insecurity demands holistic solution for the sustainability and growth of the banking industry and the economy as a whole.