Effect of Letter of Credit and Bankers’ Acceptance on Performance of Financial Institutions in Nigeria: Implication of Cross Border Banking

Abstract

Effect of letter of credit and bankers’ acceptance on performance of financial institutions in Nigeria:
implication of cross border banking was investigated. The study adopted the ex-post facto design. The
population of the study comprised of eight (8) cross-border banks operating in Nigeria as at December,
2021. Secondary data were sourced from the published annual reports Nigerian Stock Exchange fact book
which covered the period of 2015-2021. Descriptive statistics and Panel Data Analysis Radom Effect Method
were used for data analysis with decision rule at 0.05 level of significant. Results of the study reveal that
letter of credit has significant effect on the profitability of cross-border banks in Nigeria while bankers’
acceptance has no significant effect on the profitability of cross-border banks in Nigeria. Based on these
findings, the study recommended among others that letters of credit and bankers’ acceptance should be
outsourced to accredited private companies and individuals at a minimum monthly charge while Nigerian
banks operating cross-border should consider establishing more branches to ensure larger spread and
benefit from economies of scale.