In this article, we examined the effect of criminal activities on firms’ market power in Nigerian banking industry. Data sourced from Central Bank of Nigeria, National Bureau of Statistics, Nigerian Police force, annual report and accounts of commercial banks in Nigeria were analysed using autoregressive distributed lag-bound test methodology. The study revealed that crime, innovation, market size and capital requirements had negative relationship with firms’ market power in the long run. Criminal activity had no significant effect on firms’ power, while other variables had significant effects on market power. However, in the short run, crime had positive effect on firm’s power, while other variables had negative effect. Meanwhile, all the variables with the exception of innovation had significant effect on firm’s power. The previous period crime rate had significant and positive effect on current period of firm’s market power. This means a firm that employs sophisticated security devices would increase in market share by wooing more customers through deposit safety guaranteed. Consequently, such a firm enjoyed market power in the industry. While, in the long run, the market power disappeared, because most firms would have increased their security level. Henceforth, an attempt to provide for more sophisticated security devices would bring down normal profit in the long run. Therefore, such actions have no value to woo more customers. The study, therefore, concluded that while firms could consider criminal activities as a relevant variable in the short-run decision-making, such a variable becomes irrelevant in the long-run decision-making.

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