Service Quality and Financial Performance of Selected Banks in Nigeria (2006-2013)

Abstract

This work examined the relationship between investments in service quality programmes by banks on their financial performance as well as the relationship between service quality delivery and the choice of banks and repeat purchase decisions by bank customers. The aim being to enhance Nigerian banks image in the global financial market. Banks in Nigeria continuously declare huge annual profits despite the fact that there has been seemingly increasing cases of complaints about the quality of services these banks render to their customers. This study investigated causality between investments in service quality programmes and the financial performance of Nigerian banks. Survey approach was used in obtaining the primary data and panel data for the secondary data. The use of cointegration method enabled the estimation of relationships among the research variables. Pearson Correlation and Regression methods of data analysis were employed to verify the relationship between investments in service quality programmes and financial performance of these banks using the SPSS Version 22 software package. The aggregated results indicate that profitability of Nigerian banks is not a function of investments in service quality programmes and that choice of banks by customers is not a function of service quality experiences. However, there is a positive relationship between service quality and repeat purchase decisions. Also, there is a positive but insignificant relationship between volume of deposits and investments in service quality; there is also a positive but insignificant relationship between investments in service quality programmes and the earnings of banks. These findings clearly show the absence of a strong relationship between investments in service quality programmes and financial performance in the Nigerian banking sector. This is an indication that there has not been marked improvement in the provision of quality banking services that would draw the attention of customers. Based on the findings, it was recommended that to be able to achieve patronage on the part of the customers in the increasing competitive banking business, banks should organize their operations according to the needs expressed (or in several cases even not expressed) by the customers so as to attract and maintain such customers. There is the need to evaluate those service quality attributes that contribute to customer satisfaction and loyalty so as to explore the possibility of investing in such service quality programmes which can have the potential for impacting on profits of banks.