CHAPTER ONE Introduction 1

1.1 Background to the Study
In recent times, Information Technology(IT), which basically involves the use of electronic gadgets especially computers of storing, analyzing and distributing data, is having a dramatic influence on almost all aspects of individual lives and that of the national economy-the banking sector inclusive. The increasing use of IT has allowed for integration of different economic units in a spectacular way. This phenomenon is not only applicable to Nigeria but other economies of the world, though the level of their usage may differ. In Nigeria, IT usage, especially in the banking sector, has considerably improved, even though it may not be as high as those observed in advanced countries (Adeoti, 2005; Adeyemi 2006).
The use of IT in the banking sector became of interest to this study due to the rapid change going on in the business environment, there has been a need for organizations to employ a faster, more efficient and more effective way of carrying out their activities in order to get better results and performance from operations. Thus, there is no better method that could be employed in achieving better performance by organizations that the use of information technology.
Information technology has become a global tool for the banking industry to reach global markets. The use of Information technology in banks has become a global phenomenon and every bank must be Information technology compliant in order to survive in the global competitive environment. The introduction of Information technology has changed manual and traditional forms of doing business and is being replaced by the sophisticated technology that is based on automation and interconnection of computers and other electronic devices. For instance, ledger books, paper invoice, printed materials and business trips are being replaced with online billing and payments, an elaborate website with product information and real-time teleconferencing across continents and time zones (Ojokuku and Sajuyigbe, 2012).
Moreso, the role of information technology in this modern age cannot be overemphasized especially in the banking industry which operates in a complex and competitive environment. Due to the tight competition, there are a lot of changing conditions and highly unpredictable economic climate. Laudon and Laudon (2010) contend that managers cannot ignore information systems because they play a critical role in contemporary organizations. Also, Adetayo, Sanni, Ilori (2009) and Boyett and Boyett (2009) emphasized the effect of IT on business and the effect of business on IT while Oyelusi, Ilori, Ogwu, and Adagunodo (2010) also claimed that only banks that overhaul the while of their payment and delivery systems, operations and apply IT devices are likely to survive and prosper in the new millennium.
However, some scholars have argued that additional investments in information technology contributed negatively to productivity. Morisson and Bernact (2009), Baily (2008) posited that additional investments contributed negatively to productivity, arguing that ‘estimated marginal benefits of investments in IT are less than the estimated marginal costs”. Litchenberg (2009) also argued that although IT investments have increased productivity, it has not resulted in supernormal business profitability rather there was some evidence of small or negative impact on profitability. Mulira (2009) also observed that ad-hoc acquisition of IT has often resulted in under-utilization of the equipment and the developmental impact on such cases has also been minimal.
Hence, the main purpose of this study is to conduct a survey on the impact of the implementation of information technology on the operational efficiency of banks in Nigeria. that is if it has actually impacted on banking positively or negatively.

1.2 Statement of The Problem
In this 21st century, business organizations need to find new and faster ways to adapt to the changing business environment. These days, computers and information processing devices are everywhere; they make work faster and more efficiently carried out. Computers and information processing influence decisions made by managers and decision makers and also affect how work is organized and how employees feel about work. The essential element of management is information processing and thus information technology systems are expected to heavily influence management and business operations.
However, the decision to invest in information technology by the organization is based on fear of being left behind by competitors rather than on a genuine understanding of the real benefit that information technology brings to the organization. Thus, the main focus of this research work is to investigate the extent of the impact of information technology on the performance of business organizations dealing especially with the banking industry.

1.3 Objectives of The Study
The general purpose of this study is to examine the impact of information technology on the operational efficiency of banks in Nigeria. This study is set out to achieve the following objectives to:
1. Assess the effect of information technology on bank services delivery.
2. Assess the impact of information technology on bank’s profit.
3. Examine whether or not information technology has any effect on the daily operations of banks in Nigeria.
14. Research Questions
This study addresses the following questions:
1. To what extent does information technology improve Nigerian banks ‘service delivery?
2. Does information technology have an influence on banks’ profit?
3. To what extent does information technology affect the daily operations of banks in Nigeria?

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1.5 Research Hypotheses
The following hypotheses have been developed:
H01: There is no significant relationship between information technology and Nigerian banks ‘service delivery.
H01: There is a significant relationship between information technology and Nigerian banks ‘service delivery.

1.6 Significance of the Study
The study examines the impact of information technology on organization’s performance. It is hoped that the research result would enable organizations more especially the banking industry to know the benefit or effect of IT on their profitability after investing in information technology. The findings of this study will assist senior management to have a more realistic approach in making decisions on organizational investments and the associated expectation of the likely benefits. Moreover, it is expected to serve as a blueprint for students, managers and employees or organizations who are interested in conducting a research on the impact of information technology in organizations.

1.7 Scope and Limitation of The Study
In carrying out this research work, the focus of the study is on the impact of information technology on the operational efficiency of banks in Nigeria. This study examines the information technology banking operation of a commercial bank in Nigeria.
However, due to the short time is given in carrying out this study, the study is limited to some commercial banks in Nigeria.

1.8 Operational Definition
Information: This can be defined as processed data that has been verified as accurate and timely, organized for a purpose and presented within a context that gives it meaning and also relevant to the decision at hand.
Information technology (IT): This can be defined as both the hardware and software that is used to store, retrieve and manipulate data in order to process it into information.Organization: This can be defined as a group of people who form a business in order to achieve a particular aim.
Performance: This can be defined as a successful execution of a contract, or fulfillment of an obligation.
operational efficiency: it can be defined as the ratio between an output gained from the business and an input to run a business operation. When improving operational efficiency, the output to input ratio improves.


1.1 Background to the Study
In the present business environment, firms require effective management of working capital that provides a financial metric which signifies effective liquidity accessible to the firm for the purpose of improving various aspects of its financial performance (Azeez, Abubakar, & Olamide, 2016). A combination of working capital and fixed assets such as equipment and plant are all considered working capital. For instance, when a firm is endowed with assets and profitability, and the assets cannot be turned into cash then it is short of liquidity and therefore it is paramount for the firms to have a positive working capital so as to fulfil both maturation of the short term debt and forthcoming operational expenses (Kasiran, Mohamad, & Chin, 2016).
According to Azeez, Abubakar, and Olamide, (2016), the most significant subject in financial decision making is working capital as all asset investment entails suitable financing, however WC is overlooked in when making financial decision because it is always involved in investment and financing in short term periods. According to Kimeli (2014), working capital affects financial performance of a firm by failing to contribute return on equity. Firms that achieve maximum value return always have an ideal level of working capital. Owele & Makokeyo, 2015) argue that a firm with larger inventory helps them to reduce stock-out risks since the trade credits stimulates firm sales by letting the customers to assess the quality of product before doing the payments. The accounts payable is another constituent of working capital, firms delaying payments of the suppliers, the get the opportunity to evaluate the quality of supplied products thus making them financial flexible. Shah, & Sana, (2005) argue that when invoices payments are done late, increases the cost of the firm incase where discount was to be given for early payment.
According to Owolabi et al., (2012) the primary goal of any business firm is to capitalize on the profitability as well as increase the wealth of firm shareholders or owners, balancing between firm liquidity and profitability during the daily operation of the firm facilitates the smooth running as well as meeting the company’s obligation. Uremandu, Ben-Caleb, ; Enyi, (2012) argue that firm profitability, liquidity and growth is directly affected by the working capital management, thus the amount of money invested in a firm as working capital should be similarly high compared to the total assets employed.
Financial performance is measured using financial matrices like profitability, liquidity, solvency, repayment capacity, short-term financial management, financial efficiency and firm over capacity. Profit means the wealth that a company has created from the utilization of its available resources (Valentine, 2014). The liquidity of a business determines its ability to maintain its liquid cash and cash equivalents to meet its debt obligation on a timely basis using the quick ratio and current ratio. Solvency is used to a measure the ability of a business to clear its debt obligations if all its assets are sold together with its ability to recover from financial turmoil (Woodruff, 2014).
A company’s financial performance can also be measured by how well it manages its short term financial goals for example WCM and inventory management (Purdue, 2013). The firm’s financial activities can be measured in monetary terms to provide an insight in the performance of an organization as a whole. This measurement can also be used to determine the firm’s overall wealth over a given time horizon. Tippins & Sohi, (2003) argue that the most familiar measures of financial performance are ROE and ROA.
The ROE measures earnings over a period of time on shareholders equity investment. It is also the measurement for the amount of income generated by the investment mad by an organization’s owners (equity holders). The return of asset ROA measured the return on total assets after interest and taxes. It provides the management with information on the level of efficiency with which assets are financed by either equity or debt are generating after tax profits to firm (Orlitzky, Schmidt, ; Rynes, 2003).
1.1.1 Global Perspective of Working Capital Management
In Pakistan, the WCM is viewed as an integral process of enhancing financial performance (Bagh et al., 2016). Firms maintaining appropriate level of WC will be able to improve its financial performance. According to Bagh et al., 2016, the financial performance of manufacturing firms in Pakistan is influenced by WCM. Bagh et al., (2016) argue that some the WCM practices that influence firm performance through ROA, ROE and EPS include cash conversion cycle and average payment period.
Baveld (2012) in Netherland carried a study on the association between firm’s gross operating profit and accounts receivables. The study findings revealed that during non-crisis period, the relationship between the account receivables and gross operating profit was significant but negative, while during crisis period the relationship between the account receivables and gross operating profit had no significant association. The study recommended that during the crisis the firms in Netherland association between accounts receivables and firm’s profitability changes by minimizing their accounts receivables so as to maximize their profitability during crisis periods.
Mohamad and Saad (2010) argue that the association between current ratio and financial performance among listed Malaysian firms was negative and significant. The study results revealed that the profitability and market value of the firm were greatly affected by WCM. Furthermore, Eljely, (2004) also asserted that the current ratio and profitability of the Saudi Arabia firms was negative.
1.1.2 Regional Perspective of Working Capital Management
According to Louw, Hall and Brummer (2016), decreasing the investment of inventory and trade receivables whereas increasing the trade payables improved the profitability of South African retail firms; inventory management has a strong substantial effect on a firm’s profitability. Louw, Hall and Brummer (2016) recommended that retail firms to implement innovative inventory management systems so as enhance inventory levels and profitability. Akoto et al., (2013), also asserted that correlation between profitability and accounts receivable days of retail firms in South Africa was significant but negative.
Luqman, (2014) in Nigeria analyzed the working capital management of all brewery firms and revealed that cash balances, receivable management and payables and inventories and debtors had a major effect on profitability of breweries firms in Nigeria. The level of leverage affects the corporate profitability negatively and insignificantly. The growth rate in earnings affects the dividend payout ratio negatively while the profitability and net trade cycle affects the dividend payout ratio is affected positively (Oladipupo & Okafor 2013).
In Ghana, the correlation between CCC and bank profitability is positive and significant, but the size, exchange risk, credit risk and capital structure insignificantly affects the bank profitability (Adjei & Yeboah, 2011). The firms listed at Ghana Stock Exchange performed poorly than unlisted firms. Akoto et al., (2013), argue that managers can advance shareholder’s capital by setting in measures that to reduce the accounts receivable days to 30 days. In Ghana the domestic regulations were established to safeguard native firms and to prevent them from importers activities at the same time promoting an increase in demand for the local manufactured goods.