Banking Sector Reform In Nigeria: A Regulatory Imperative For A Sustainable Banking Industry

Abstract

The focuses on banking reform in Nigeria: A regulatory imperative for a sustainable banking industry. It is the aim of this research to critically appraise the Nigerian banking sector against the back-drop of its strategic role in national economic development. The research design adopted in this study falls within the paradigm of an Ex-post facto design type. Data were collected mainly from secondary records and analyzed using ordinary least square method. However, the study revealed that, prior to the 2004 banking sector reforms, many Nigerian banks were undercapitalized and this accounted for their poor performance in terms of low profitability, low liquidity, low returns on investments and lack of sustainability. The study also reveals that huge bad debts profile or poor asset quality has a negative contribution to bank performance and was statistically significant. Interest rate had a positive effect and a significant effect on bank performance. On the whole, the incorporated variables (BCAP, INTR) contributed positively to the growth of Nigerian banks, and the economy at large. Based on the findings above, it is concluded that effective banking sector reforms is a regulatory imperative for a sustainable banking industry in Nigeria. This study recommends periodic increase in the banks’ capitalization especially since the hyper-inflationary rate in our economy is not showing any sign of abating. This will afford the banks the financial leverage to perform some of its strategic developmental roles especially in the real sector of the economy to bring about the much-desired national economic development. They study strongly recommends the strict implementation of the risk-focused and rule-based regulatory framework by the regulators. This it is believed will reduce the high incidence of huge bad debts profile of banks and consequently improve the assets quality of banks for better performance.

Keywords: Bank profit, Bank capitalization, Bank bad debts, Bank interest rate, Good corporate                              governance