INTERNET BANKING AND FINANCIAL INTERMEDIATION IN THE NIGERIAN BANKING INDUSTRY

The acceptance and deployment of internet banking service is expected to improve financial intermediation banking system by reducing cost of transactions, enhancing liquidity and increased financial intermediation. However, this is a far cry to what is being experienced in the Nigerian banking industry, as credit flow from banks have been on the decline. It has been revealed that the total credit from banks to the economy recorded a decline of #135.8bn from #15.74tn at the end of the fourth quarter of last year to #15.6tn in the first three months of 2020. These revelations suggest that Nigeria’s economic growth trajectory has been diminutive, as individuals have found it difficult to have access for either start-up or expansion of their businesses from banks. On this premise, this study was carried out to investigate the effect of internet banking on financial intermediation. In a clear departure from existing literature, the study factored in the moderating effects of interest rate and cash reserve ratio, which hitherto has been identified as key impediments to bank intermediation. Data was collected from 2009 to 2020 on monthly bases from the Central Bank of Nigeria (CBN) for the variables; financial intermediation (measured as ratio of currency outside banks to broad money supply), interest rate, cash reserve ratio and internet banking service for all commercial banks in Nigeria. Linear Regression models were formulated to achieve the stated objectives. Findings revealed that internet banking service has a negative insignificant effect on financial intermediation, the interaction between internet banking and interest rate has a positive insignificant effect on financial intermediation while the interaction between internet banking and cash reserve ratio has a negative insignificant effect on financial intermediation. It was recommended among others that the Central bank of Nigeria should make efforts to alleviate the cost of internet banking borne by banks. This will certainly reduce the burden on banks and make more money available for intermediation.