Banking Sector Reforms in Nigeria’s Fourth Republic: A Review of Evidence

Abstract

One of the most outstanding debates in recent times is whether government banking sector reforms promotes growth and development. Objectively, this study is quite significant as it empirically re-investigates the role of the Nigerian banking sector reforms especially of the fourth republic (2000-2010) on the economy. The study adopts the Granger-causality and Johansen  co-integration econometric approaches in the estimation procedure. Overall, evidence from the study shows that there is no link between fourth republic banking sector reform and economic growth in Nigeria, thereby contradicting the finance-growth nexus of Mckinnon and Shaw (1973) hypothesis. The study, therefore, concludes that any serious effort to ensure the strengthening of the banking sector should be preceded by the narrowing down of the interest rate spread. Moreover, the reform programmes of the Nigerian banking sector should be sustained so as to channel resources from the surplus sector (savings) to the deficit sector (investment) by putting in place appropriate macroeconomic policies that will engender productive activities and ensure sustainable economic growth.

Keywords: Governance, Banking sector reform, economic growth, co-integration.