CHAPTER ONE

INTRODUCTION

1.1 Background to the Study

Strategic management is the field concerned with the major intended and emergent initiatives that general managers take on behalf of owners, using organisational resources to improve firm performance in a changing external environment (Nag et al., 2007). In practice, it involves defining an organisation's mission, vision and objectives, designing the policies, plans and programmes needed to achieve them, allocating resources to put those plans into effect, and monitoring results so that strategies can be adjusted as conditions change. It therefore sits above day-to-day tactics and below the broad setting of goals, and it involves not only the management team but also the board of directors and other stakeholders.

Scholars use different labels for the components of strategic management, but the underlying sequence is broadly consistent: environmental and capability analysis, strategy formulation and choice, implementation, and ongoing evaluation and control. A strategy yields results only if the organisation is aligned with its environment and if its actions are consistent with what managers, markets and stakeholders expect. Empirical work in Nigeria supports the practical relevance of these ideas for banks. Ademokoya (2017), using panel data on selected deposit money banks for 2006 to 2015, found a significant relationship between strategic management and bank profitability. Oboh and Ajibolade (2017), in a survey of 71 bank managers across 20 banks, found that strategic management accounting contributes significantly to strategic decision-making, especially in relation to competitive advantage and market share.

Banks occupy a strategic position in national development. As financial intermediaries, they mobilise savings from surplus units and channel them to deficit units, and the soundness of the banking system is widely regarded as a necessary condition for economic growth and poverty reduction. The Nigerian banking sector has undergone substantial structural change, particularly since the Central Bank of Nigeria (CBN) announced its banking reform agenda on 6 July 2004. That reform raised the minimum capital base of banks from ₦2 billion to ₦25 billion, to be met by 31 December 2005 (Abdou et al., 2016; Boloupremo & Ogege, 2018), and the CBN's consolidation guidelines recognised only mergers and outright acquisitions or takeovers as acceptable ways of complying (Central Bank of Nigeria, 2004). The sector has continued to face pressure for change. A fresh recapitalisation programme introduced by the CBN in 2024 has led banks to pursue equity raises, strategic investors and, in some cases, merger discussions (Chambers and Partners, 2026). In a sector subject to repeated regulatory and competitive shocks, the quality of strategic management is of obvious importance, and so are the factors that prevent banks from practising it effectively.

1.2 Overview of the Nigerian Banking System

Banking in Nigeria began under expatriate ownership. One of the earliest banks, the African Banking Corporation, was later absorbed into the British Bank for West Africa, which is today First Bank of Nigeria Plc, while the Industrial and Commercial Bank is recognised as the first indigenous bank (Abdou et al., 2016). Over the following decades the sector expanded and was progressively liberalised, and the proliferation of banks, together with weaknesses in credit regulation, management and governance, contributed to periodic distress (Abdou et al., 2016).

The 2004 reform was designed to address these weaknesses by strengthening the capital base of banks and building a system that could serve both the domestic and the wider regional economy (Abdou et al., 2016). Studies of the consolidation exercise report significant differences between bank performance before and after consolidation (Abdou et al., 2016; Boloupremo & Ogege, 2018). The reform also changed the competitive environment in which banks operate. Larger, better-capitalised banks now compete for customers on the basis of network coverage, digital channels and service quality, which raises the strategic stakes for management. Research on Nigerian retail banks has also examined how governance practices relate to customer loyalty, a further dimension on which bank strategy is judged (Obioha & Garg, 2018).

The quality of management has long been a concern in the industry. Agbada (2013) observed that the Nigerian banking sector has suffered from mismanagement, financial misappropriation and administrative recklessness, and argued that competence-based recruitment and placement of managers at all levels is central to sustaining performance. This points directly to the managerial and behavioural impediments that the present study investigates.

1.3 Statement of the Problem

A strategic management system is only as effective as the controls that keep it on course. Strategic control refers to the process by which managers monitor ongoing activities, assess whether they are carried out efficiently and effectively, and take corrective action where necessary, while also anticipating events and responding to emerging opportunities. Where performance standards are agreed in advance and implementation is monitored consistently, employees and units are more likely to commit effort to the strategic plan. Similarly, an organisation that devotes adequate time and funds to strategic planning is better placed to understand threats and opportunities, to produce higher-quality plans, and to achieve superior performance.

Despite the evidence that strategic management improves bank outcomes (Ademokoya, 2017), many Nigerian banks continue to experience weak implementation. Studies point to resistance to change and poor project management as key barriers to the re-engineering of business processes in deposit money banks (Ogbo et al., 2018), and to the need to manage employee resistance as banks restructure and downsize (Lawal et al., 2016). Even so, empirical work has not examined, in an integrated way, the systemic and behavioural impediments that prevent bank managers from applying a strategic approach to management. This study fills that gap and is guided by the following problem questions:

• What impediments limit the use of a strategic management approach in Nigerian banks?
• Do bank managers resist change, behaviourally and systemically, in relation to strategic management?

1.4 Objectives of the Study

The broad objective of the study is to analyse the impediments to strategic management in the Nigerian banking industry. The specific objectives are to:

1. identify the major impediments to strategic management practices in the Nigerian banking sector;
2. establish the causes of resistance by bank management to changes in strategic management practices; and
3. recommend measures for removing these impediments.

1.5 Research Questions

The study seeks answers to the following questions:

1. What impediments limit the use of a strategic approach to management in the selected banks?
2. Do strategic management practices play a significant role in the banking industry?
3. Has the introduction of new products and services improved the performance and profitability of the banks?
4. What measures can reduce the impediments to strategic management in the banking industry?

1.6 Research Hypotheses

The following null hypotheses guide the study:

H₀₁: There are no significant impediments to strategic management practices in the Nigerian banking sector.

H₀₂: Strategic management practices have no significant role in the Nigerian banking sector.

H₀₃: The introduction of new products and services has no significant effect on bank profitability.

H₀₄: There are no measures that can significantly reduce the impediments to strategic management in the Nigerian banking sector.

1.7 Scope of the Study

The study covers three selected banks in Nigeria for the period 2006 to 2010, which corresponds to the post-consolidation era in the Nigerian banking sector. Analytical techniques are used to examine the data. Because the study is restricted to three banks, its findings are indicative and should be generalised to the wider industry with caution.

1.8 Significance of the Study

The study is significant in several respects. For academics, it generates evidence that can be extended along other dimensions of the topic and encourages further research on strategic management in banking. For banks and other business organisations, it clarifies the consequences of applying strategic management properly, in three ways. First, managers will be better able to adapt to change from the point a strategy is conceived through to execution, converting strategy into practice. Second, banks will be better able to meet customer demands by translating customer service strategies into specific policies and procedures. Third, banks will be better placed to improve financial performance through effective strategy execution, consistent with the positive relationship between strategic management and profitability reported in earlier work (Ademokoya, 2017).

References

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