Information Technology for Development 10 (2003) 1324 IOS Press

13

Information technology in Nigerian banks: The limits of expectations

Fabian A. Ehikhamenor
Africa Regional Centre for Information Science, University of Ibadan, Ibadan, Nigeria E-mail: arcis@[Link]
Abstract. In the last ten years, banks in developed countries have been investing more and more in information technology (IT) as a means to reduce costs and improve operational efciency. An investigation of the application of IT in Nigerian banks was carried out in order to determine the expectations and success of IT implementations in the sector. The data were generated from a survey of randomly selected branches of 56 banks in Lagos, the commercial capital of Nigeria. Almost all the banks had an IT policy, the main thrusts of which where to achieve full application of IT, to be able to meet organisational goals, to secure competitive advantage, and to be up to date. Only 54.6% of them actually achieved some measure of successful implementations. The expected benets of investment in IT were realised in only a relatively few number of banks. The consequence was that less than 40% of the banks were poised to maximise the benets of IT through major investments, especially in the areas of online access and transactions, electronic commerce, and electronic publishing. It is estimated that at least 60% of the branches of these banks are spending less than $150,000 annually on IT. An upsurge of investment is, however, expected, rst by the banks that style themselves as progressive and have already made some success in IT implementations, and later by the other banks.

1. Introduction Globalisation has brought intense competition in the nancial services industry. This competition has the tendency to bring out the best in the nancial institutions. To remain competitive, they need the exibility to be able to respond rapidly with new products to fast-changing market needs. One major challenge is how to meet the increasing expectations of customers [29]. The retail banking industry, in particular, has become completely transformed. Previously, the branch ofce was the icon of retail banking. Consumer access to the banks nancial services and products were generally limited to the hours in which the branch was open, and services and products provided by the bank were relatively limited. The branch ofce, as the place where consumers did the majority of their nancial transactions, was the primary representative of the bank [3]. However, new competitive pressures have emerged from non-banking institutions providing similar services and products and foreign banks entering domestic markets. Consumers have become more astute in their buying, less loyal to a particular bank, and more demanding of products and services that t their specic nancial needs and time schedules. Consequently, they have attained the position to dictate where, how, and when they will conduct their nancial affairs. To respond to consumer and market demands, retail bankers must provide greater convenience, increase accessibility of nancial services and products, and deliver at a faster pace new and better targeted products and services. At the same time, total costs of operations and development must be maintained or reduced. All of this must be done to acquire or maintain a signicant percentage of the consumers nancial transactions and establish an acceptable prot margin [3].
0268-1102/03/$8.00 2003 IOS Press. All rights reserved

14

F.A. Ehikhamenor / Information technology in Nigerian banks: The limits of expectations

Information technology is giving necessary competitive advantage. In recent years, banks have been investing more and more in IT, not only as a means to reduce costs and improve operations, but presumably also as a key to protability. With IT, banks are able to improve on their management of customer relationships, streamline operations, expand their activities, improve services and minimise risk exposures in a turbulent market [13,35]. Software solution is helping to optimise branch delivery through facilitating the planning of new sites, relocations and closures based on a host of detailed data, such as population demographics and density [1]. The Internet cash management service allows businesses to access balance and payment information, print statements and transfer money between accounts via a banks Web site [2]. Cavano [7] noted that with the advent of the Internet, speed had begun to overtake trust in client relationships, and innovation had surpassed tradition, forming a new paradigm the digital economy. He warned that banks that have not kept pace with the latest technology would discover that they can not deliver the information or services demanded by the new digital economy. Considering the crucial role that IT is playing in the banking industry, Mark Hill [12] advised that technology should be treated like any investment in a banks future success; that the investment needs to be well planned and instituted in stages; that it should mirror long-term business strategies and have the commitment of bank executives; and that it should be expected to provide a return on investment. The banking sector is actually an old-time beneciary of the offerings of IT. According to GraingerSmith and Oppenheim [10], IT has played a central role in the development of the banking industry, for the following reasons: Banks are not, contrary to the popular image, primarily in the money business. They are in the information business. Their primary activities are the capture, distribution, analysis, and processing of nancial information. IT is the second largest xed cost incurred by banks after personnel. IT has enabled banks to widen the range of services offered to their customers and transform their operating systems. IT has enabled banks to increase the volume of their services, operate at a higher level of efciency and realise economies of scale. In the 1960s, the use of mainframes by banks facilitated the replacement of paper by book entries. During the 1970s banks created databases; with the automation of simple and repetitive clerical tasks, there were considerable gains in efciency. The 1980s were a period of new slogans in information systems development. Minicomputers had already become a market leader in computer architecture since the 1970s, but were now rivalled by microcomputers. The concepts of distributed computing, decentralisation, downsizing, and user-friendliness, dominated issues of information systems. During the 1990s, there was growing concern for greater and greater functionality, memory capacity and management, as well as improvement in visual displays through graphical user interfaces. Besides the need for management to have timely information, the necessity to be able to simulate events and make forecasts accentuated the demand for greater intelligence and easier and better interfaces. The western world has continued to dominate the world of IT and set the pace in the transformation of the world economy. The banking industry has in the last decade been characterised by increasing investment in IT. For instance, in 1992, U.K. recorded an average expenditure of 8.5 million [Link] per nancial institution. The level of investment in IT by American nancial institutions was considered to be higher, representing about 20% of their total expenditure on xed costs [10]. By mid-1990s, British banks had introduced a wide range of specialised technologies in the banking sector. Of particular interest at that time was the Lending Adviser software that helped nancial institutions in codifying

F.A. Ehikhamenor / Information technology in Nigerian banks: The limits of expectations

15

their knowledge of their business [9]. Australian banks were equally increasing their IT investment. For several years beginning from 1995, the annual expenditure on the upgrading of IT and introduction of new services was A$1.95 billion. The estimated expenditure for 1998 was A$2.1 billion. Then the banks were moving into smartcards and investing increasingly in Internet-based transactions. By the year 1998, nancial institutions in the West were spending between 7% and 15% of their revenue on IT [5]. The New York-based Chase Manhattan Corp. was spending $2 billion annually on IT. A sizeable chunk of that amount was allocated to the use of document management and workow technologies to deliver new products and services and reduce operating costs. Among the IT projects were a workow automation project in the facilities management area, a cheque image archive, a workow automation project for auto-lending operations, and a document management project for Chases global private bank [19]. To ensure that technology plans would be aligned with business objectives, Chase Manhattan Corp. set up a technology governance board composed of senior technologists and business executives. Chase also established Centres of Excellence, each devoted to a particular technology area [20]. East Asia has followed the West with its own model of development that has yielded what has been referred to as an economic miracle. In East Asia, nancial markets are rapidly developing in breadth and depth. The development of these markets requires not only new products, new players and global rules, but also a robust nancial infrastructure that ensures efcient, secure and timely clearing, settlement and payment of nancial transactions. The global market that has been created by technology through the linking of local markets has attened the hierarchy of business by cutting out inefcient layers and the role of middlemen, so that the producer can reach the consumer directly. In East Asia, this has empowered the individual consumer producer by increasing his access to information, his capacity to process that information and his capacity to reach out directly to other consumers and producers. In furtherance of this objective, Asian central banks have introduced Real Time Gross Settlement Inter-bank payment systems as the cornerstone of a modern electronic nancial system [35]. The transformation of the banking sector by IT in the west and East Asia has become the normative course along which the banking sector in the Third World is expected to move. For over a decade, the Third World has, in fact, been warned to take advantage of the revolutionary advances in IT to reinforce economic and social changes if they are to have a place in global socio-economic relations that are increasingly dominated by the growing information economy. According to Talero and Gaudette [31], a new society is emerging, with pervasive information capabilities, that is more competitive, more democratic, less centralised, less stable, better able to address individual needs, and friendlier to the environment. These changes dictate, for all countries, a major adjustment to harness information for economic and social development. Talero and Gaudette advised that developing countries, like advanced countries, must adjust or risk exclusion from the global economy and severe competitive disadvantage for their goods and services. The merit of the concept of leap-frogging into high IT-driven banking by the Third World is subject to debate. However, we will assume, for now, the validity of the western and East Asian models of IT-driven socio-economic development for every part of the world, and then proceed to explore the level of response of the banking sector in Nigeria to this scenario. 2. The banking sector in Nigeria The banking sector in Nigeria has in the last decade gone through a traumatic period of a mixed fortune of expansion and contraction, expectations and frustrations, and resilience in the struggle for survival. From the mid-1990s, the sector recorded phenomenal growth in the number of banking institutions that

16

F.A. Ehikhamenor / Information technology in Nigerian banks: The limits of expectations

were registered to begin operation. The number of licensed banks rose to 89 in 1998 [34]. The prevailing political crisis and the appalling human rights records of the military government had brought global sanctions on the country, which almost completely destroyed its socio-economic foundations. During the period of economic blight, all the public utilities deteriorated. The banking sector oundered and became distressed. Returning to democratic governance in May 1999, Nigeria emerged from economic sanctions and global isolation. It was the dawn of a new optimism and new expectations. For the banking sector, it also brought a new phase of sanitisation, including organisational and ethical reforms and recapitalisation. In the struggle for survival and for many other reasons, the Nigerian banking industry seemed to have accepted the inevitability of investing in IT. It had become evident from the developments around the world that the tremendous role of information technology in the management of information and business processes left no more option of indifference. Ironically, this awareness was not altogether lacking previously. It would seem that it actually had its genesis earlier than 1990; but then, there was a long period of inertia, which could be attributed to an absence of the full interplay of market forces in a completely deregulated economy as well as a lack of an enabling infrastructural environment. In the early 1990s, there appeared to be a sudden realisation of the need for a department to manage the information resources of the banks. Advertisements of vacancies for the positions of data processing manager, information systems manager, systems analysts and programmers, and so forth, ooded the print media. Many banks started processing account verication and reconciliation from computer printouts of their databases. It is difcult to relate this realisation to specic infrastructural or economic factors within the country. The economy was not buoyant nor was there any improvement in the infrastructure. As a matter fact, the deterioration of the infrastructure under military regimes continued. Electric power generation remained epileptic while the telecommunications sub-sector continued to be a major source of frustration. The interest in IT in the banking industry was probably a spillover from what was going on in the western world as well as one of the outcomes of the aggressive marketing strategies of IT companies. Indeed, the banks that took that step of faith did not seem to make much impression on their customers. Neither the queues of customers nor the length of time to get a transaction through got shorter. The recurrent explanation by the bank staff hinged on power cut, system breakdown, and problems of peak periods of banking transactions. These explanations did little to calm frayed nerves. By mid-1990s, not many banks had yet ventured into online transactions. The banks that did so saw themselves as progressive. They were poised to offer more efcient and prompt services, and they succeeded in raising the expectations of their customers. Besides having a system to show for their claims to progressiveness, it is very doubtful if those banks had a competitive edge over other banks as a result of their IT implementations. Certainly, they did not meet the expectations of their customers. Rather, customers were getting increasingly impatient with slow and inefcient services. In those years of economic distress, panic and uncertainty, many other banks became more cautious, and, in worse cases, apathetic about the IT hype. What might seem like a decisive return of interest in IT is a matter of very recent development. Since 1999, there have been more obvious efforts, through government supported workshops and conferences, to fashion an agenda for national IT infrastructural development. In these efforts, the Nigerian Communications Commission has been playing a major role. The banks cannot isolate themselves from what has been going on. They are expected to be the nanciers in IT development, but they should also be beneciaries. However, there is always the nagging question of how far to go with investment in IT. This question would require a clear denition of the benets expected and knowing the exact contribution of IT to protability. But then, how easy is it to compute the contribution of IT to the annual prot

F.A. Ehikhamenor / Information technology in Nigerian banks: The limits of expectations Table 1 Expectations in IT policies Expectation To meet organisational goals To meet up with competition To be up to date To enhance protability To keep abreast with technological advancement To improve organisational image For innovative products and services Because of new business opportunities To take advantage of available technology To take advantage of available manpower Percentage of respondents 73.5 69.8 68.1 64.7 59.2 57.1 55.0 44.5 24.0 21.9

17

of a bank? Grainer-Smith and Oppenheim once reported that the failure to implement techniques for systematically identifying and quantifying IT costs and benets has made it difcult to determine the level of added value resulting from investment in IT and its contribution to protability [10]. Certainly, the drive in the adoption of IT in banks has not been solely a matter of demonstrable correlation between the level of investment in IT and prot after tax. With this brief overview of IT based developments in the banking sector in the world in general, and in Nigeria, in particular, we face a number of questions. Are the Nigerian banks now poised to make a big leap into the world of IT? What are the expectations this time? Are they being realised? These and other related questions are addressed in this study. The data was generated between March and June 2000 from a survey of 56 banks in Lagos, the commercial capital city of Nigeria. Nearly every bank in the country (other than community banks) has a number of branches in Lagos, while most of them have their head ofce there. Although these banks represent no more than 60% of the commercial banks in Nigeria, they control well over 80% of the turnover in the sector. They are certainly representative of the commercial banks in Nigeria. Branches of these banks were randomly selected within articially delineated zones of the city. In each branch, two copies of a questionnaire were distributed to be completed by a top administrative executive and the head of whatever section that managed the IT facilities. A total of 238 duly completed copies of the questionnaire (75.3%) were recovered. 3. Results All but one respondents reported that their banks had an IT policy. For 69.3% of them, the main thrust of their policy was to achieve full application of IT. That is, all their operations and services would have to be based on information technological innovations within the shortest time possible. For another 22.7%, their strategy was that of phased application. Their ultimate goal was full application, but theirs was a piecemeal approach and their time frame was undened. For the remaining 5.9%, their policy envisaged partial application. They would implement an application that seems necessary and urgent. It would seem that this was a case of limited vision. Irrespective of the thrust of their IT policy, all the banks shared the conviction that the role of IT in banking operations and services has become very important and can no longer be ignored. The expectations that motivated the articulation and inuenced the timing of the IT policy are presented in Table 1. The main reasons given for adopting IT are to meet organisational goals, to be able to meet with competition, and to be up to date. All but four respondents reported having an IT (Data Processing, Computer, or MIS) department. Of the 234 respondents who did, 63.7% indicated that the department had a staff strength of between 1 and

18

F.A. Ehikhamenor / Information technology in Nigerian banks: The limits of expectations Table 2 Designations of head of IT departments Designation Head, IT and Technical Support Assistant General Manager Senior Manager Computer Manager General Manager Systems Administrator Assistant Manager Other designations of lower ranks No designation Percentage of Respondents 27.3 26.1 14.3 7.6 6.3 5.5 5.5 1.7 5.9

Table 3 IT applications in the banks Application Treasury operation Human resources Bank Master Reconciliation Loans and deposits Money market Assets management Fund transfer General ledger MIS module Teller Security management Budget Domiciliary Multi-currency Percentage of respondents 35.6 35.2 31.0 29.9 25.5 24.8 22.5 22.1 20.3 19.6 16.2 14.8 14.8 13.6 13.5

19, 21.2% gave a staff strength of between 20 and 39; and the remaining 15.1% gave no gure. The head of such a department is designated as in Table 2. While the banks seem to have acquired or developed applications for almost every banking operation, the most frequently reported applications are enumerated in Table 3. Other applications include international trade and nance, central clearing house, cheque management, materials management, payroll, consolidation, limits monitoring, core accounting, messaging, balance sheet, retail banking, and signature verication. According to 26.4% of the respondents, implementations of some of these modules in their banks began before 1990. How successful these applications have been is a difcult question to answer. Some of the respondents (33.6%) gave no information on the success of their implementations. It would be understood that they did not want to admit that they were unsuccessful. Another 11.8% agreed that their applications were not working satisfactorily or not at all. A few of them indicated that some upgrading was necessary. Only 54.6% could declare that their systems were functioning satisfactorily. Whether or not implementations were successful does not seem to have any relationship with such factors as age and staff strength of the bank or whether in-house or outside systems expertise was used. Table 4 below presents the benets that IT implementations have brought to some of the banks. A comparison between Tables 1 and 4 shows a great deal of discrepancy between the expectations in IT implementations and the benets that have been realised. Besides, only a small number of banks realised each of the benets reported. Obviously, the expectations in investment in IT have not been yet realised

F.A. Ehikhamenor / Information technology in Nigerian banks: The limits of expectations Table 4 Benets of IT implementations Benets Timeliness in service delivery Innovativeness in products and services Increased responsiveness Better customer service and satisfaction Enhanced protability Improvement in skills Simplicity in operations and transactions Accuracy in data and records manipulations Prevention of fraud Reduced paper work Improved organisational image Percentage of respondents 34.9 30.7 27.7 26.9 25.2 22.3 21.8 16.0 13.4 12.2 6.7

19

Table 5 Areas for future investment Areas for consideration Percentage of respondents Online access and transactions 32.8 Electronic commerce 29.4 Electronic publishing 28.2 Proper feasibility study 27.3 Training 21.4 More advertising 19.7 Judicious allocation of resources 17.2 Multimedia applications 13.0

in many banks. Nevertheless, some of the banks are poised to maximise the benets of IT and invest in the areas enumerated in Table 5. 4. Discussion A high expectation is often the springboard for action. The only problem is that it is not always realised. When it fails, it could prescribe and institutionalise inaction, indifference, and even cynicism. Surely the Nigerian banks had high expectations in investing in IT; and so, the rather low success rate of IT implementations recorded in this study is rather bothersome. Our results indicate that the expectations of investing in IT implementations were not realised in a good number of the banks. The two main motivating considerations for adopting IT in the banking sector in Nigeria are the desire to meet organisational goals and the need to cope with competition. This nding agrees with the motivation generally reported in the literature. Indeed, the idea of investing in IT for the purpose of meeting organisational goals cannot be faulted. So also is the idea of using IT as a competitive weapon [26] and as a means of competitive advantage [27]. What we are still to understand fully is how IT affects the fundamental competitive environment of a rm. Parsons [26] offers some glimpse into this matter. According to him, IT affects the environment at three levels. At the industry level, it changes the products and services that are offered as well as the markets and economics of production through changes in processes. At the rm level, IT affects buyer-seller relationships, affects substitution, and can act as a barrier to new entrants. At the strategy level, IT can help a rm become a low cost leader, to create niche markets by customising products or to differentiate products by incorporating technology into them.

20

F.A. Ehikhamenor / Information technology in Nigerian banks: The limits of expectations

Considering the poor level of success in IT application recorded in this study, it is not very clear how IT is serving as a competitive weapon or conferring competitive advantage in the banking sector in Nigeria. It would seem that there are a number of organisational factors that are important in the interplay between the competitive environment of the banks and success and effectiveness of technological innovation, and which need to be identied. In fact, Kanungo and Chouthoy [16] earlier observed that organisational context plays an important role in how organisations develop and implement IT strategies and plans. They recommended that, since in developing nations like India embedded organisational and cultural issues exert a strong impact on strategies adopted by organisations, it is important to identify those organisational attributes that determine IT effectiveness. Another reason given for adopting IT is the desire to be up to date. The justication is that everyone else is moving ahead and updating. The banks want to modernise and offer products and services that are available in the western world. We may also consider this to be a case of global technology pull. Mohammed Bulama, the Managing Director and Chief Executive of Bank of the North Limited, declared that IT had become strategic to the operations of his bank. According to him, banking has become global in nature. It is not only possible to deposit money in Kaduna and withdraw it in Aba, it is also possible to deposit money here in Nigeria and withdraw it overseas, and vice versa [4]. The sheer ambition to modernise, unless tamed by careful rationalisation, could become nothing but a cloak over naivet . It leads to ad hoc acquisition of equipment. For instance, it was found that the e majority of the organisations in India did not use IT effectively; and empirical evidence suggested that a lack of planned IT strategy, which resulted in ad hoc IT processes, was a major impediment to IT effectiveness in those organisations [15]. As Mulira [21] observed, ad-hoc acquisition of IT has often resulted in under-utilisation of the equipment and the developmental impact in such cases has also been minimal. It is further noted that the use of IT is a result of isolated initiatives without preconceived strategies. Equipment is acquired by different user organisations with little co-ordination and planning. Part of the problem is the hard-sell activities of manufacturers and vendors. Many organisations are persuaded to buy equipment before they decide what to do with it. If there have been many negative consequences in the adoption of IT in different sub-Saharan countries [23], the explanation must be found, at least partly, in lack of planning. Unfortunately, we cannot tell precisely how much planning went into the IT projects in the banks in this study. The fourth important reason for adopting IT is to enhance protability. This seems to be the most controversial motivation as there has been considerable debate on whether or not investment in IT results in improvement in protability. Although some correlation between corporate performance and the use of IT has been demonstrated [16,33], many more studies have given a contrary verdict. Prasad and Harker [28] conrmed that several studies both at the industry level and at the rm level have contributed differing understandings of this phenomenon. In their own study of the effect of IT investment on both productivity and protability in the retail banking sector in the United States, they concluded that additional investment in IT might not have real benets but might be more of a strategic necessity to stay even with the competition. As many as 70% of the IT users in Europe declared that their systems were not returning their companys investment [17]. Studies by OECD [24] and Lubbe and others [18] further indicated that IT was not directly related to overall productivity. Other studies in India and South Africa showed that many organisations were actually unhappy with the returns they got from their investment on information systems [8,15,22]. These studies revealed that a large number of information systems either failed or were not used effectively. A recent study by Jaffe [14], also concludes that few banks in Asia have been able to derive measurable value from their online initiatives, and integration issues have made it even harder for banks to get a handle on their IT infrastructure and online strategies.

F.A. Ehikhamenor / Information technology in Nigerian banks: The limits of expectations

21

These reports raise a crucial question. With the widespread incidence of poor returns in IT investment, what purpose does IT serve in Nigerian banks? In the light of what we know about the chequered history of the banking sector in Nigeria, it would seem that survival instinct is at the core of the attempts at technological innovation. This is not peculiar to Nigeria. In a time of great uncertainty in the markets across Asia, the banks have been confronted with regulatory changes, economic downturn, consolidation, non-performing loans, erce competition, and an increasingly complex relationship with information technology. In this circumstance, technology has become a vital component of banking, with the Internet as its most visible face [14]. This is in spite of the fact that few banks have been able to derive measurable value from their online initiatives. The Nigerian banks have also been caught in a stormy market environment of unstable policies and the vagaries of economic depression and restructuring. These problems are further compounded by the forces of globalisation. The dynamics of globalisation are impelling the Nigerian banks to adopt whatever technological innovations are necessary to interface with multinational conglomerates of nancial institutions and a global trading network. The consequence of failure to do so is eventual extinction. As it is the case in many developing countries around the world, the banks in Nigeria did not evolve an endogenous IT culture, but have to purchase technologies that come very often in a black box. Globalisation has also imposed the problem of stunting the growth of local IT industry. In a country that has no denitive and protective IT policy thrust, where liberalisation has been accepted as the basis of economic recovery, both the hardware and software subsectors of the industry are almost exclusively in the hands of foreign rms. We see a different scenario in several other developing countries including Brazil and India [6,11]. In these countries, government intervention in stimulating and protecting the local industry promoted the development of a critical mass of skill and capabilities. In fact, the development of technological capabilities was the main thrust of the Brazilian policies for IT during the 1980s. They were reasonably successful with respect to their objectives of increasing local capabilities and reducing the dependence on foreign technology [6]. Consequently, banking automation evolved as a clear case of establishing technological relations between users and producers of IT systems; and that facilitated very efcient diffusion. Although globalisation with the imperative of liberalisation has changed the fortune of the local industry in both Brazil and India through unrestricted import, availability of foreign technology and off-the-shelf solutions, the consequences are not as serious as they have proved to be in Nigeria. Whatever the deciencies in the development and implementation of IT in Nigerian banks, it is clear that the status of IT is not altogether insignicant, at least in the consciousness of operators. The problem is really the difculty of dynamically aligning business vision with IT goals over time, especially because the bank management is not very much in control of the externalities that are involved. There is at least a demonstrable commitment to the use of IT. Most of the banks have functional IT units, and the importance attached to it by management can be inferred from the resources allocated to it. However, we must expect considerable disparity between banks and between the head ofce and other branches of the same bank. Furthermore, the designation of the person heading the unit is an important and reliable indicator of the strategic importance of the unit. The banks in which such an ofcial is a senior manager or an assistant general manager obviously demonstrate a greater level of commitment to making IT investment a major strategy of their operation. It is reasonable to expect that these designations would be more likely in the head ofces, and so, the 40.4% response indicating these designations could translate into about 86% of the 56 banks. It was difcult to obtain the IT investment proles of the banks as not many banks would give such information. A conservative estimate based on staff strength and the spectrum of implementations in place would put at least 60% of the branches in the category of those spending less than $150,000 annually on their IT department. So, in comparison to banks in the western world,

22

F.A. Ehikhamenor / Information technology in Nigerian banks: The limits of expectations

the IT investment prole of Nigerian banks may appear to be negligible. Of course, such comparison would be misleading as the level of turnover is different. It would be conceded, however, that this level of investment is not very impressive as can be judged by the current level of technological advances, the need to optimise the benets of global information infrastructure and the need to meet the challenges of globalisation. In fact, it was previously discovered that the IT architecture of the Nigerian banking industry was based principally on networked PCs with an average of 18 PCs to 100 workers [34]. Considering the fact that a ratio of one to one is now becoming the norm, we have here another indication that the banking sector in Nigeria is not yet technology-driven. It is to be expected that some of the banks will continue to push their way ahead into the IT world, possibly propelled by the euphoria of success. This is evident from the fact that the average annual IT budget of about 19 banks rose by 111% from $1.26 million in 1997 to $2.65 million in 1998 [34]. Some recent reports suggest that IT and online banking have given a few banks an edge in the highly competitive market, and the more progressive banks have outstripped others. In 1998, the top ve of such banks ranked in terms of prot after tax were CITIBANK, Union Bank, First Bank, Zenith, and United Bank for Africa [32]. Further progress has been recorded in the Valucard project, in which a consortium of 19 banks co-operated to implement a smartcard electronic purse. The technology based on a multi-application chip operating system was designed on the same standards as Europay, MasterCard, and Visa (EMV). Some of the banks are also vigorously marketing new IT based products and services. For instance, in November 2000, the United Bank for Africa (UBA) Plc., one of Nigerian leading banks, showcased a range of new products at the International Trade Fair in Lagos. UBA would like to see itself as a leading IT-driven player in the banking industry; but several other banks can also make that claim. The way forward is obvious. The fast lane of virtual banking is open to those who can continuously commit large and increasing proportion of their revenue to investment in IT. They are positioning themselves to take full advantage of a wide range of technological solutions, including ATM, phone banking, home banking, and Internet banking. All the banks are aware that the increasing role of IT in banking poses a serious threat to the banks that do not get involved in the current IT-based transformation of the banking sector all over the world. It is also to be expected that many of the banks that seem to be unprepared now to launch into the IT world, because of their unpleasant experience of unrealised expectations, will emerge from the pall of present disillusion. Then, they will be obliged, either by conversion or from apprehension of the dangers of being left behind, to make an irrevocable commitment to business process reengineering and IT strategies. A bold IT agenda in Nigerian banking sector is thus essentially futuristic. There will be increased emphasis on online access and transactions, electronic commerce, electronic publishing, proper feasibility study, training in IT, and aggressive advertising of products and services. Although major investments are essentially a consideration for the future, the spate of advertising of new IT-based products and services in the news media and trade fairs would suggest that the dawn of that future is very near. For instance, the Wema Bank Plc recently announced its intention to expand its information technology prole with a 250 million (about $2.5 million) investment in Wide Area Network (WAN) communication system during the current three-year strategic plan period that began in April 2000. When completed, the WAN system will link the banks key branches with a chain of V-SAT and a broad-spectrum radio infrastructure [25]. Of course, a number of banks already have some implementations of WAN based on dial-up lines, leased lines, or radio links; and we are likely to hear of more ambitious plans from other banks during the months ahead.

F.A. Ehikhamenor / Information technology in Nigerian banks: The limits of expectations

23

5. Concluding remarks The Nigerian banks are under pressure from the forces of globalisation to adopt IT in order to t into the evolving global banking system. So the motivation is principally that of survival. In the absence of a home-grown IT culture and a strong user-producer relation, the banks could not rely on internally developed products nor could they maintain a balanced interaction between business objectives and IT innovations. We have seen the effects of a panic and ad hoc implementation of information systems. They include under-utilisation or non-utilisation, inappropriate solutions, frequent downtime, complete failure, and frustration. It would seem that the banking sector in Nigeria is up against an intimidating world of technology that hoists to success the institutions that are ready and equipped for success, and creates a stumbling block for those that are not. It is a case of success begetting success. The current level of investment in and implementation of IT is not impressive, and very few banks can claim to have realised some of their expectations in investing in IT. So for many banks, expectations have turned into indifference or disillusion. This is reected in the comparatively low proportion of those that have plans for future undertakings. It is however unlikely that such indifference will endure for long in view of its grave consequences. References
[1] [2] [3] [4] [5] [6] [7] [8] [9] [10] [11] [12] [13] [14] [15] [16] [17] [18] [19] M.D. Amato, Summit employs mapping system to pinpoint best branch, ATM sites, Bank Systems and Technology 36(4) (1999), 54. R. Bates, Provident ushers in Web-based service, Bank Systems and Technology 35(9) (1998, 46. B.J. Boutt , Information Technology Demystied, A Report from the UniForum Technical Steering Committee, Open e Systems Help Retail Banks Compete, [Link]@[Link], 21 December, 2001. M. Bulama, Information Technology: Strategic to our Banking Operations, Today Newspaper, Today Communications Ltd, todaycom@[Link]; today@[Link]; July 2329, 2000. B. Caldwell, New problems, new solutions, Informationweek 700 (1998), 149156. J.E. Cassiolato and M.A.C. Baptista, The effects of the Brazilian liberalisation of the IT industry on technological capabilities of local rms, Information Technology for Development 7 (1996), 5373. K. Cavano, Will banks survive in the new, fast-moving digital economy? Bank Systems and Technology 36(1) (1999), 56. S. Duda, Perceptions of IT effectiveness across organisational levels: Implications for organisational effectiveness, Working Paper, Department of Management Studies, Indian Institute of Technology, New Delhi, 1994. A. Freeman, Learning how to lend, The Economist 341 (Oct 1996), 810. N. Grainger-Smith and C. Oppenheim, The role of information systems and technology (IS/IT) in investment banks, Journal of Information Science 20(5) (1994), 323333. G. Harindranath and J. Liebenau, The impact of globalisation on Indias information technology industry, Information Technology for Development 6 (1995), 7384. M. Hill, Technology investment in business banking, Journal of Lending and Credit Risk Management 81(6) (1999), 3035. T. Hoffman, Winning weapon, Computerworld (16 Nov 1998), 1720. D. Jaffe, eBanking in Asia: Making Sense of a turbulent sector, [Link] November 2001. V. Jain, A comparison of information systems strategies and usage of private and public sector banks, Working Paper, Department of Management Studies, Indian Institute of Technology, New Delhi, 1994. S. Kanungo and M. Chouthoy, IT planning in India: Implications for IT effectiveness, Information Technology for Development 8 (1998), 7187. A.T. Kearney, Corporate organisations and overhead effectiveness survey, A.T. Kearney, 1987. S. Lubbe, R. Eggett and N. Hawkes, Determining the signicance of decision in the selection of IT investments in South Africa, Information Technology for Development 6 (1995), 125138. S. Marlin, Chasing document management, Inform 13(4) (1999), 7682.

24 [20] [21] [22] [23] [24] [25] [26] [27] [28] [29] [30] [31] [32] [33] [34] [35]

F.A. Ehikhamenor / Information technology in Nigerian banks: The limits of expectations S. Marlin, Centers of Excellence, Inform 13(4) (1999), 78. N.K. Mulira, Managing information technology in Uganda: Strategies and policy formulation, Information Technology for Development 6 (1995), 95105. J.F. Niel, The nature of information technology, in IT-Dev 95 Conference, Department of Information Systems, University of the Witwatersrand, Johannesburg, 1995. M. Odedra, M. Lawrie, M. Bennett and S. Goodman, Information Technology in Sub-Saharan Africa, International Perspectives, CACM, goodman@[Link]. OECD, A report of management of marketing information, OASIS, 1988. A. Ogidan, Wema initiates 250 million on WAN, The Guardian, (Tuesday October 31, 2000), 47. G.L. Parsons, Information technology: A new competitive weapon, Sloan Management Review 25(1) (1983). M.E. Porter and V.E. Millar, How information gives you a competitive advantage, Harvard Business Review (JulyAug 1985). B. Prasad and P.T. Harker, Examining the contribution of information technology towar productivity and protability in US retail banking, Working Paper, Number: 97-09, [Link] K. Rao, Carving a niche, Banker 148(874) (1998), 80. J. Rees, Spreading the net, Far Eastern Economic Review 159 (3 Oct 1996), 7980. E. Talero and P. Gaudette, Harnessing information for development: A proposal for a World Bank group vision and strategy, Telecommunications and Informatics Division, Industry and Energy Department, The World Bank, 1818 H Street NW, Washington DC 20433, USA, etalero@[Link]. The top performers, African Business 236 (1998), 28. T. Weitzendorf and H. Hiller, Prot impact of information technology, Review of Information Science 1(2) (1996). E.E. Woherem, ed., Information technology in the Nigerian banking industry, Spectrum Books, Ibadan, Nigeria, 2000. J. Yam, The impact of technology on nancial development in East Asia, Journal of International Affairs 51(2) (1998), 539555.