This book captures nigeria s crisis management experience and lessons learnt during the fiveyear tenure of sanusi lamido sanusi as cbn governor. Banking reforms, deposit money banks, economic development, minimum capital base. Banking reform in nigeria the aftermath of the 2009. Banking sector consolidation on banks performance in nigeria. Using both descriptive statistics and econometric methods, three sets of hypothesis were tested. It has however, recently been intensified due to forces of globalization, which are guiding the integration of worlds financial markets and economy. There are two types of banking regulationseconomic and prudential.
Introduction although the land use act of 1978 was meant to usher in a new land reform in nigeria, it soon became a clog in the wheel of development over the years. As a result, both our lending and nonlending support for core public sector reform have expanded rapidly in the past four years. Still on,,, impact of banking sector consolidation on banks performance in nigeria 20002015. Banking sector reforms that are associated with conscious government policy are often in response to industry changes such as deregulation. Banking reforms in nigeria started in july, 2004 and climaxed in august 2009 and beyond. Banking reform is the reform of the banking sector under the objectives of solving the chronic nonprofit earning problems and strengthening of the overall health of the public sector banks to face international. Figure 1 below shows the phases of banking reform in nigeria. In order to strengthen the competitive and operational capabilities of banks in nigeria with a view towards returning global and public confidence to the nigerian banking sector and the economy in general, the central bank of nigeria instituted a banking reform which saw most of the then existing 89 banks merging with each other. Prior to the 2005 banking reforms in nigeria, congestion and long queues were the order of the day in.
Vision 2020 would help the industry to understand the future evolution of banking and the evolving strategies for reaping maximum benefits from the changing scenario in banking and financial landscape. The financial sector reforms and their effect on the. Banking reforms have resulted from deliberate policy response to correct perceived or impending banking sector crisis and subsequent failure. It was forwarded to consolidate the existing commercial banks. Banking sector reforms and the performance of commercial. Under this reform regime, banking business was redefined to include. This paper investigates the implications and challenges of banking sector reform in nigeria. The study assessed the effect of banking sector reforms on the performance of deposit money banks in nigeria with special emphasis on the 2004 bank reforms. Global financial meltdown and the reforms in the nigerian banking sector speech by mr sanusi lamido sanusi, governor of the central bank of nigeria, at a public lecture delivered at the convocation square, abubakar tafawa balewa university, bauchi, 10 december 2010. It notes four eras of banking sector reforms in nigeria, viz presap 197085, the postsap 198693, the reforms lethargy 19931998, presoludo 19992004 and postsoludo 20052006. The nigeria banking sector reforms in 2004 the banking sector reforms of the year 2004 which placed emphasis on recapitalization has been generally described as banking sector consolidation in nigeria. Prior to 1952 there was no legislation governing the banking system in nigeria. The history of banking in nigeria started in the colonial era. Against this background, the central bank of nigeria introduced a minimum capitalization base for banking institutions to meet up the demand of the customers.
According to the mckinnonshaw hypothesis, financial repression arises mainly when a country imposes ceilings on nominal deposit and lending interest rates at a low. Central bank of nigeria reform policy and the banking sector. Through reforms, the monetary authority usually central bank of nigeria removes faults and abuses, repair, restore or correct certain anomalies that may lead to systemic failure and erode public confidence in the system. The history of banking operation and supervision in nigeria could be traced to the period between 1892 and 1894 when african banking corporation and first bank of nigeria which was formerly known as the bank of british west africa bbwa was established5. In order to be thorough, the performance of commercial banks before the reforms was also investigated. First and foremost is the wrong perception of the intent of the reforms. Empirical evidence from nigeria ali, jude igyo 1, ekpe mary jane 2, aigba modupe omotayo3 1accounting and finance department federal university of agriculture, makurdi nigeria 2departmentof accountancys federal polytechnic nassarawa state nigeria. After the bbwa, barclays bank became the second expatriate bank to operate in nigeria by. The main objective of the 2004 reform was to consolidate, deepen and enhance financial sector stability and competitiveness. The reforms in nigeria have been directed towards financial intermediation, financial.
The world bank is deeply committed to helping its client countries build wellfunctioning and accountable governments. The british bank of west africa bbwa started operating in nigeria by the year 1892. How then has the recent banking reforms and bank consolidation been effecting the growth of the nigeria economy. Brief history of nigerian banking a formal legal structure to banking in nigeria is a relatively recent invention. These changes are built upon the recent banking sector reforms. Reforming public institutions and strengthening governanceis part of a broader. Nigeria s commitment to universal health coverage was enshrined by the passage of the national health act of 2014 in response to the continued. Nigerian banking reform by allnigeriabanks on january 12, 2015 no comments since his appointment in the summer of 2009, the new governor of the central bank of nigeria cbn, lamido sanusi, has introduced a spate of reforms in response to the global financial crisis and the mismanagement of certain nigerian banks. The nigerian banking sector has gone through rapid changes over the years.
The 1986 reform of the financial system saw a policy shift from direct control to a market. Banking sector reforms and bank performance in subsaharan africa. This paper is therefore aimed at empirically analyzing how these banking reforms affect the allocation of credits to activity sectors of the economy and their relative impacts on economic growth in nigeria. Early reforms in the nigerian banking industry 19582004 the cbn act of 1958 established the central bank of nigeria and charged it with the responsibility to promote monetary stability and sound financial structure in nigeria. An assessment of the impact of banking reforms on economic. Jan 21, 2015 the nigerian banking reforms faced some challenges despite its laudable achievements. Banking reform has been an ongoing phenomenon in nigerian financial sector. The present reform sets out essentially to rectify this and to provide registrable titles to all land owners in the country. The world bank is helping to fight poverty and improve living standards for the people of nigeria with more than ibrd loans and ida credits since 1958. The three largest domestic banking stocks in kenya and nigeria, the economic powerhouses of east and west africa respectively, have soared more than 50% since january 1st 20 see. In a nutshell, to ensure the achievement of macroeconomic goals banking reform is expected to effectively play a significant role in the stability of international financial markets central bank of nigeria, 2012.
The policy thrust at inception, was to grow the banks and position them to play pivotal roles in driving development across the sectors of the economy. The study examines the effect of financial reforms on banking sector efficiency in nigeria from 1986 2016. This reform focused on bank consolidation through the mechanism of merger and acquisition. Impact of banking sector reforms on economic growth in. In recent times, the regulatory authority on banking in nigeria, the central bank of nigeria, has introduced reforms that have fundamentally altered the outlook, operation and nature of the banking system in the country. Abstract until a decade or so ago, the banking industry in nigeria had many kind of bank related problems. Since 2004, the central bank of nigeria cbn has embarked on several intensive banking sector reforms to strengthen the hitherto weak and.
Financial sector reform in nigeria had been started with the deregulation of the rates of interest. The major objective of the study was to examine how banking sector reforms impact on economic growth in nigeria. The data required for this study was gathered through the instrument of questionnaire. We assess the impacts of banking sector reforms on the development of the financial sector and growth of the economy over the period 19702010. Evidence from recent nigerias banking sector reforms martina chinazom okorie1 2david onyinyechi agu 1,2department of economics, university of nigeria, nsukka, nigeria abstract there is a growing concern associated with the recent banking sector reform on whether it achieved its purpose of making banks efficient or not. Economic reforms in nigeria economic reforms was first introduced in nigeria in 2003, during the second term of president olusegun obasanjo. Banking sector reforms and bank performance in subsaharan. The purpose of the study was to access the effects of the reforms on the. The deregulation of banking in 1986 provided the impetus for the structural adjustment programme. The reform program was known as the national economic empowerment and development strategy.
Pdf resolution of recapitalisation through bridge banks. Bank reforms have played a role in the performance of banks in nigeria. Pdf bank reforms have played a role in the performance of banks in nigeria. Impact of banking reforms on service delivery in the nigerian banking sector andow helen afang phd kaduna state university, nigeria abstract the banking reforms introduced in 2005 was basically to move the nigerian economy forward and to reposition the banking.
Banking sector reform in nigeria had been introduced in 2004. An assessment of the impacts of banking sector reforms in. Banking sector reforms and bank performance in sub. Banking reforms in nigeria and its impact on the economy. The introduction of the new banking model, especially specialised banking noninterest banking, is intended to broaden the scope of financial services offered by banks in nigeria. Reform of the nigerian banking system assessment of the asset management corporation of nigeria amcon and recent developments. Prior before the reforms, developments in the banking sector indicated a mixed trend in the performance of banks. The population of study consisted of the twenty four 24 deposit money banks operating in nigeria as at 31st december 2009. Ascertain the short coming of the banks in nigeria banking sector. The apex bank apart from capitalization also invested in banking. Banking sector reforms implications for employees by.
This book captures nigeria s crisis management experience and lessons learnt during the fiveyear tenure of sanusi lamid. Familiarize with the impact if the policy in the upgrading of the nigeria banking sector. Understand the effect of the implement of the reform policy of recapitalization on the nigeria banking sector. Reforms in the banking sector india bank management. Recent banking reforms in nigeria international journal of. Be it as it may, agbo 20 emphatically proved that the universal banking reform of nigeria was able to propel growth in the real sector of the economy. May 05, 2019 know for the bank of nigeria reform of recapitalization. Moreover, while there are myriads of studies on the effects of reform policy on other sectors of the nigerian economies, there is paucity of studies on the effects of bank reforms on banking performance itself in nigeria. Financial sector reform had been adopted by the nigerian government as a part of their economic reform program. In nigeria, banking, in its modern form, started in 1892 when african banking corporation abc commenced formal banking business in the country. The mechanism of acquisition and merger were used, and in the end, the number of such banks was cut from 89 to 25 in the whole country. The financial sector reforms and their effect on the nigerian.
An analytical synthesis of perfomance and main issues teboho moja visiting professor of higher education new york university department of administration, leadership and technology new york, ny. Requirement of banks is a veritable reform on banks in nigeria as it yields a positive result. These studies provide data on the ease of doing business, rank each location, and recommend reforms to improve performance in each of the. Though the banking system in nigeria is on the average rated satisfactory, a detailed analysis of the condition of individual banks showed that no banks was rated very sound soludo 2005. Financial reforms in nigeria dates back to 1952 when the banking ordinance was enacted. Banks take customer deposits in return for paying customers an annual interest payment. Read banking reform in nigeria the aftermath of the 2009 financial crisis by y. Brief history of banking in nigeria from 1990 till date. The recent banking sector reforms in nigeria are a component of the general financial sector reforms which started since 1986 during the structural adjustment programme sap. E banking reform and national development in nigeria.
Health, nutrition and population global practice, world bank, washington, usa. In nigeria ningi and dutse, 2008, shows that cbn reform has changed the market structure of the banking sector, increased the efficiency and reliability of the banks, created opportunities for financial institutions and market participants, and raised their intermediation potentials but studies. Brief history of banking in nigeria from 1990 till date legit. The central bank of nigeria in 2004, announced a point reform agenda designed to enable the banking system develop the required flexibility to support the economic development of the nation by efficiently performing its function as the pivot of financial intermediation lemo. The test results reveal that all the variables are stationary at their fist difference. It is in this context, we hope that this report on banking on the future. Ardl bounds test, banking reforms, economic growth, nigeria. Nigeria has undergone two major banking reforms and each banking reform has had a significant impact on the economy of the nation. First, we test for the stationary state of our data using the levin, lin and chu t stationary test. The design of the study was expost facto and desk research. Banking sector reforms and sustainable development in nigeria. Banking reform in subsaharan africa introduction 3 page overview africas banking sector is thriving.
Issues and challenges kanayo ogujiuba african institute for applied economics, enugu state, nigeria email. Impact of banking reforms on service delivery in the nigerian. Banking sector reforms in nigeria 5 section three rationale for banking reforms in nigeria banking reforms are often pursued in response to either shocks or conscious government policy. A bank is a financial institution, which is involved, in borrowing and lending money.
Pdf on jan 1, 2014, aniekan okon akpansung and others published recent banking reforms in nigeria. Financial sector reforms in nigeria have mainly been motivated by the financial repression paradigm amongst others note 2. It provides a backdrop of the subprime mortgage crisis in the us characterised by the lehman brothers debacle in 200708, which precipitated global. Banks consolidation in nigeria covenant university. Kpmgs global network can help turn data into value. The study examines the effect of financial sector reform on economic growth in nigeria over the period of 27 year 19862012. The reform exercises in nigeria of 1952 and 1994 were linked to domestic banking crisis while those of 1969, 2001 and 2004 were stirred by government economic policy to mobilise financial resources for economic growth and to entrench. Acceptance houses, discount houses, and merchant commercial banks. It notes four eras of banking sector reforms in nigeria, viz presap 197085, the postsap 198693, the reforms lethargy 1993. The bank then uses the majority of these deposits to lend to. The government aimed to establish a reliable and efficient banking sector so that it could guarantee the safety of the depositors money.
Reform of the nigerian banking system assessment of the. Reforms and bank consolidation in nigeria by odufu i. Critical elements of banking reform in nigeria the current reforms which began in 2004 with the consolidation programme were necessitated by the need to strengthen the banks. The impact of banking reforms on the profitability of.
We have decades of experience analyzing tax, audit and business data. The main thrust of the point reform agenda was the prescription of minimum shareholders. The first banking reform was effected in 2004 while the second banking reform took place in 2009. Sc, mba, aca abstract recent reforms carried out by sanusi lamido sanusi, governor of the central bank of nigeria cbn, in the banking industry appear desirable. Impact of banking reforms on service delivery in the. In nigeria, the banking reform championed by the nigerian apex bank, central bank of nigeria cbn in the mid2009 included accounting reform in a policy statement. This book captures nigerias crisis management experience and lessons learnt. The purpose of the study was to access the effects of the reforms on the performance of banks in nigeria. The study recommends that, the monetary authorities should be more. Performance, pitfalls, and future policy options by e.
This resulted in rebasing of commercial banks from. Generally, banking sector reforms in nigeria have been embarked upon to achieve market liberalization in order to promote efficiency in resource. The cbn aims at ensuring the stability and soundness of nigeria s banking industry within the shortest possible time. Nnanna 2004 stated that, the banking sector reforms by central bank of nigeria was intended to address issues raised specifically to strengthen the banking system with the vision to make nigeria the financial hub of africa. The study investigated the performance of commercial banks in nigeria after banking sector reforms. Strengthening governance reforming public institutions and. Banking reforms and the effect on economic development of nigeria. This realization confirms the position of kumbirai and webb 2010 that studied the effect of banking sector reforms on the performance of commercial banks in south africa and found that reforms were capable of increasing the performance of commercial banks. There is causality between banking sector reforms and performance of nigerian economy. Economy profile of nigeria doing business 2020 indicators in order of appearance in the document. Nigeria banking reform can be divided into two main phases, 2004 and 2009. A key regional player in west africa, nigeria accounts for about half of west africas population with approximately 202 million people and one of the largest populations of youth in the.
But, lets stay on our topic and begin to mention some significant years in the modern nigerian banking history, from 1990 till date. Through this reform program the government intended to liberalize the financial sector and to ease the entry into the banking sector. It examines the various roles played by banking reforms in the development of the nigerian. In the pre reform era before july 1991 the reserve bank of india rbi regulated banks by imposing constraints on interest rates, tightening entry norms and directed lending to ensure judicious end use of bank credit. The study empirically examined the impact of banking sector reforms on economic growth in nigeria using the annual time series data for forty six years 19702015. Welcome to the kpmg nigeria knowledge base of research that demonstrates our understanding of business challenges faced by companies in nigeria.
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