ABSTRACT
This study investigates the effect of banking sector reforms on economic
growth in Nigeria over the period 1980-2011. Using the ordinary least square
regression technique, we established that interest rate, total banking credit
to the private sector, inflation rate, inflation rate lagged by one year, size
of banking sector capital and cash reserve ratios account for a very high
proportion of the variation in economic growth in Nigeria; and although there
is a strong and positive relationship between economic growth and the total
banking sector capital, the relationship between economic growth and other
exogenous variables of interest rate, exchange rate, total banking sector
credit to the private sector, inflation rate and cash reserve ratio reveal the
wrong signs. The implication which emerges from our empirical results with
regards to the wrong signs of these parameters is that theoretical expectations
are not always valid; this is because of other factors such as market
inefficiencies, policy conflicts, information asymmetry and government
interference in the interaction of market forces. These may produce results in
direct contradiction to theoretical expectations. The study recommends the
promotion of private sector investments through reduction in cost of funds, low
inflation and sustainable reduction in foreign exchange premium.
75 Pages
Project Reference Code:
C035
CHAPTER ONE
INTRODUCTION
1.0 Background of the Study
The reforms
in the Nigerian banking sector were long overdue. The first phase of the
reforms effort began in the year 2004 with a policy pronouncement on
recapitalization and consolidation of banks in Nigeria. The policy was intended
to strengthen the banking industry through increased capital base requirement
and merger and acquisitions.
The problem
of toxic assets or non-performing loans of banks in Nigeria was a serious issue
the regulatory authorities also had to contend with as the high level of illiquidity had threatened and jeopardized depositors’
funds and posed a ystemic risk. There
was urgent need to foster financial stability and rekindle public confidence in
the banking system as well as to prevent the possibility of a run on banks;
this necessitated further reforms
which were directed at ensuring that Nigerian banks became more competitive and
to ensure desired standards in service delivery.
The
regulatory authority, the Central Bank of Nigeria also enforced compliance with
established laws to guarantee good corporate governance practices in the banks.
Following the banking crisis of 2008, the Central Bank of Nigeria articulated a
blue print known as “The Project Alpha
Initiative” for reforming the Nigerian financial system in general and the
banking sector in particular.
The pattern
of banking in Nigeria before the reforms was universal banking system whereby all banks ventured into even non-bank
financial transactions. This was an abuse of the laudable objectives of the
universal banking system. Compounding this scenario was an erratic interest
rate regime that could hardly
counter inflationary pressures. The Nigerian banking system and indeed the
Central Bank of Nigeria was also saddled with currency management crisis as
most transactions were carried out on cash-and-carry
basis with attendant risks and high costs. This gave rise to the policy on cashless society as a critical
phase in the reform agenda.
In 2010, the
Asset Management Corporation of Nigeria (AMCON) was established following the
promulgation of its enabling Act by the National Assembly. It is a special
purpose vehicle aimed at addressing the problem of non-performing loans in the
Nigerian banking industry, among
others.
The CBN took
steps to integrate the banking system into global best practices in financial reporting and disclosure requirement
through the adoption of the
International Financial Reporting Standards in the Nigerian banking sector, by the end of 2010. This helped to
enhance market discipline, and reduced uncertainties, as well as limited the
risk of unwarranted contagion. The introduction of non-interest banking in Nigeria
is expected to herald the entry of new markets and institutional players, thus
deepening the nation’s financial markets and further the quest for financial inclusion.
Between
August and December 2009, the Central Bank of Nigeria injected the equivalent
of $4.1 billion into 10 Nigeria banks adjudged to be facing grave liquidity
crisis, sacked 8 bank CEOs and introduced a plethora of regulations and took
other direct actions deemed necessary in order to safeguard the banking sector
from systemic collapse and to ensure the stability and soundness of Nigeria’s
banking sector.
1.1 Statement of the Problem
Before the reforms, the banking sector experienced
increased spate of bank failures arising from undercapitalization, poor asset
quality weak corporate governance practices. Other factors include ineffective
control measures by the relevant regulatory authorities coupled with
inefficient service delivery by the banks. This ugly trend was compounded by
the effect of the global financial meltdown, with the resultant erosion of
public confidence in the Nigerian banking system. In spite of the reform
efforts by the Central Bank of Nigeria (CBN), the Nigerian banking system is yet
to function in line with global best practices and standards, thus forms the
crux of the problem of this study.
1.2 Purpose of the Study
1.3 Research Questions
1.4 Research Hypotheses
1.5 Scope of the Study
1.6 Significance of the Study
1.7 Limitation of the Study
1.8 Organization of the Study
1.9
Definition
of Terms
REFERENCES
Nwankwo, G.O. (1990). “Regulation Under deregulation;
An Appraisal of Monetary/Financial Polices”. Paper Presented at a Seminar
Organized by CBN.
Pandey, I.M. (2003). Financial Management. New
Delhi; McGraw Hill Publishers.
Solomon, O. (2009).”The Impact of Monetary Policy in
the Control of Inflation Rate in Nigeria, 1986-2008”. King’s Journal of
Banking and Investment, Vol. 3., No. 6.
Sullivan, A. and Steven, M.S. (2003). Economic New Jersey
“Commercial Banks”. Retrieved from www.wikipedia.org
on 31st October 2010.
CHAPTER TWO
REVIEW OF
RELATED LITERATURE
2.1 INTRODUCTION
Banking reform in Nigeria is an integral part of the country-wide
reform program undertaken to reposition the Nigerian financial system and
indeed the Nigerian economy to achieve the objective of becoming one of the 20
largest economies by the year 2020. (Balogun,
2007) and (Sanusi, 2012). As
part of the vision, the banking sector is expected to effectively play its role
in intermediation and for the banks to be among global players in the international
financial market.
The various reforms undertaken in Nigeria
The experience from the global financial crisis
further underscored the imperative of banking reforms on a regular basis. The
world economy was hit by an unprecedented financial and economic crisis in
2007-2009 resulting in a global recession. This crisis led to the collapse of
many world-renowned financial institutions and even caused an entire nation to
be rendered bankrupt. According to Adebiyi
(2009:6), “the attendant weak macro-economic fundamentals exposed these
countries to exchange rate and currency crisis that later affected
international trade and current account balances”. Decreasing asset values led
to a loss of consumer confidence and a sudden decline in consumption. These
have led to sharp decline in economic activities (Alade, 2009; Adebiyi, 2009). The Governor of the Central Bank of
Nigeria, Sanusi Lamido Sanusi at the Warwick’s economic summit, U.K (2012)
confirmed that “the Nigerian economy faltered and was hit by the second round
effect of crisis as the stock market collapsed by 70 percent in 2008-2009 and
many Nigerian banks incurred huge losses, particularly as a result of their
exposure to the capital market and downstream oil and gas sector. The Central
Bank of Nigeria gave a holistic view into what went wrong in Nigeria leading to
the banking crisis in 2008 and attributed to eight interrelated factors:
·
Macro-economic instability caused by
large and sudden capital inflows.
·
Major failures in corporate governance
at banks.
·
Lack of investor and consumer
sophistication.
·
Inadequate disclosure and
transparency about the financial position of banks.
·
Critical gaps in the regulatory
framework and regulations.
·
Uneven supervision enforcement.
·
Unstructured governance and
management process at the CBN.
·
Weakness in the business
environment.
Each of the above factors is serious in its own right.
Acted together, they brought the entire Nigerian financial system to the brink
of collapse.
2.2 Review of Reforms Since 2004
2.2:0 Bank Recapitalization and Consolidation
2.3 Electronic
(E.) Banking
2.3.1 Threats of Cyber-crimes on the Nigerian
banking system
2.3.2 The Regulatory Challenges
2.3.3 Cashless policy
2.4 Currency Restructuring Proposal
2.5 Asset Management Corporation of Nigeria
(AMCON)
2.5.1 Customer Protection.
2.5.2 Bank Charges and Interest Rates
2.6 Micro Finance Banking
2.7 International
Financial Reporting Standards (IFRS)
2.7.1 Adoption of IFRS
2.7.2 Benefits of the adoption of IFRS
2.7.3 Key stakeholders in the adoption and implementation
of IFRS
2.7.4 Regulators, Regulations and Auditors
2.8 Islamic (Non-Interest) Banking in Nigeria
2.8.1 Prospect of Islamic Banking in Nigeria
2.9.1 Capital Accounts Liberalization
2.9.2 Money Laundering Law in Nigeria
2.9.3 Money Laundering (Prohibition) Act, 2004
2.9.4 Enactment of Money Laundering (Prohibition)
Act 2011
2.9.5 Impact of the Reforms
2.9.6 Challenges to the Banking Reforms
2.9.7 Previous research
REFERENCES
CHAPTER
THREE
RESEARCH
METHODOLOGY
3.0 INTRODUCTION
This chapter deals with the logical steps taken in
carrying out the research, which enables the researcher to answer some
questions raised in the problem statement.
In this chapter sub-topics like sources of data, research design,
techniques (both analytical and quantitative) used for data analysis and
specification of model are considered. The raw data necessary for this
empirical analysis are also considered.
3.1 RESEARCH DESIGN
In this study, the pre and post research design was
employed because it describes and interprets relationships that exists between
the period before and after the banking sector reforms in Nigeria.
3.2 SOURCES OF DATA
The secondary data for the period 1980 to 2011 which
were used as the macro-economic variables in this study were obtained from the
statistical bulletin of the Central Bank of Nigeria. (various issues) The
choice of this intervening period is informed by the need to capture the
indices for the period of structural adjustment vis-à-vis deregulation and
reforms. Other secondary sources of data include the NDIC Annual Reports and
Accounts (various issues) and the Nigeria Journal of Financial Research, vol 6,
Department of Finance and Banking, University of Port Harcourt.
3.3 TECHNIQUES FOR DATA ANALYSIS
3.4 DEFINITION OF VARIABLES
3.5 SPECIFICATION OF THE MODEL
3.6 STATISTICAL TOOLS EMPLOYED
3.7 Brief Literature on the macroeconomic
variables
Interest Rate:
Cash Reserve Ratio
Foreign Exchange Rate
Inflation Rate:
Bank Capital /Private Sector Credit
REFERENCES
Project
Reference Code: C035
The COMPLETE version of this project requires payment
of N3500 only
If you like to ORDER the COMPLETE version please
contact us on: 0803-544-6622
Via Call or WhatsApp for
instructions on how to make payment
The project will be sent to you via E-mail or WhatsApp within ONE HOUR of
confirming payment
OR
.
No comments:
Post a Comment