DIGITALISATION AND BANKING PERFORMANCE IN NIGERIA: A TWO-DECADE ANALYSIS OF PROFITABILITY AND EFFICIENCY MECHANISMS

This paper employs a panel data analysis of 20 years (2005-2024) of six listed banks in Nigeria to examine the relationship between bank digitalisation and financial performance. The composite digitalisation index is built from seven indicators at the bank level covering ICT spending, delivery infrastructure, and transaction activity, and two-way fixed-effects models are estimated to account for bank-specific and macroeconomic heterogeneity. Once these are controlled for, digitalisation is not significantly associated with profitability (ROA or ROE). In contrast, digital growth is also accompanied by increases in operating expenses, as measured by the cost-to-income ratio, which is in line with the front-loaded investment and scaling costs. Exploratory threshold analysis suggests that effects could be different at different levels of digital intensity, but there is little evidence of nonlinearities. The findings show that digitalisation in the Nigerian banking sector is a long-term strategic commitment with relatively little and delayed profitability implications in the short run. The paper is a valuable addition to the digital finance literature as it offers long run bank-level evidence from an emerging African economy and highlights the importance of cost dynamics and investment timing in the assessment of the outcomes of digital transformation.