10,000 3,000

Topic Description



The Nigerian banking sector witnessed dramatic growth post-consolidation. However, neither the industry nor the regulators were sufficiently prepared to sustain and monitors the sector’s explosive growth prevailing sentiment and economic orthodoxy all encouraged this rapid growth, creating a blind spot to the risk building up in the system.

Prior to the crisis, the sentiment in the industry was that the banking sector was sound and growth should be encouraged. The IMF endorsed the strength of the banking system to support this growth. However, this sentiment proved misplaced. I believe 8 main interdependent factors led to the creation of an extremely fragile financial system that was tipped into crisis by the global financial crisis and recession.

These 8 factors were:

  1. Macro-economic instability caused by large and sudden capital inflows.
  2. Major failures incorporate government at banks
  3. Lack of investor and consumer sophistication
  4. Inadequate disclosure and transparency about financial position of banks.
  5. Critical gaps in regulatory framework and regulations.
  6. Uneven supervision and enforcement
  7. Unstructured governance and management processes at the CBN/weakness within the CBN.
  8. Weaknesses in the business environment. Each of these factors is serious on its own right. Acted together they brought the entire Nigerian financial system to the brink of collapse.


Banking regulation was first introduced in Nigeria in the early 1950s in response to the failure of local banks.

The 1952 Banking ordinance imposed minimum requirements for paid up capital and the establishment of reserve funds. This was followed by the enactment of the 1958 Central Bank act and the Banking ordinance of 1959. The banking legislation was further strengthened with the enactment of the banking decree of 1969.

Reform is an Amendment of laws to accommodate new development that the already existing regulation can no longer curtail. In other words, there cannot be reforms without regulators.

Regulation means an official rule by a government or some other authority.

Better still, Regulation means that rules are established to guide the activities of the people in order to maintain standard and if not kept, someone should be sanctioned.

Whereas, reform simply means to improve a system, or a law by making changes to it,

it is very important to note that the central bank of Nigeria which was established to regulate the activities of these commercial banks cannot conveniently do so without improving on their regulations. In other words regulation is dynamics, thus reforms are of necessity.

The need for these reforms was as a result of inefficiency and negligence, poor capitalization, poor staffing poor management and bank liquidation.

When these banks are finally liquidated, it is not just these banks and their staff that are affected, but also the Depositors, the shareholders, the government and the general public.

When such is the case, solution is almost not available thus prevention is better than cure.

This is the reason why the Central Bank of Nigeria has ensured that these banks are well capitalized and of recent that no commercial bank will be allowed to fail.

This has shown why these reforms are very important in the banking industry, if not for other important services that they do render, at least for the safety of depositors fund.


Some of the problems that have been encountered in the banking industry of Nigeria before these reforms were made:

  1. Poor capitalization
  2. Inefficiency and negligence
  3. Fraudulent practices
  4. Poor staffing
  5. poor management
  6. bank liquidation
  7. High interest rate
  8. Heavy debts
  9. Loan racketeering
  10. Little/no attraction to investment

It is believed that enhancing the existing Laws in order to solve these problems should lead to a better banking regime in Nigeria


The objectives of this study are as follows:

  1. To determine the effect of the central bank reforms on commercial banks.
  2. To prove that these reforms by the central Bank of Nigeria is of benefit to the government and commercial banks.
  3. Do you think that N25b recapitalization has enhanced bank liquidity and also increase its sales and gains in the Nigeria capital market?
  4. Do you think that the removal of banks chief executives and other related measures will help to checkmate corrupt practices these banks?

The following hypotheses are tested within the study:

Ho: These reforms have not had any positive impact to the enhancement of growth and profitability of the commercial banks in Nigeria.

Ho: These reforms have increased the level of service delivery in the Nigerian Commercial banks.


This research work will deal with the perceived impact of the CBN banking reforms on Nigerian Commercial banks.

The area this work will cover is the branches of all these commercial banks in Enugu metropolis, which will be generalized due to the existence of all these commercial banks in Nigeria.

The study will be limited to two selected CBN reforms in the area of recapitalization and removal of Bank chief Executives, thus; tenure limits.




The major roles that are expected to be played by these reforms if given adequate support in the present economic circumstances in Nigeria are:

  1. The research work is aimed at enhancing the performance of the commercial banks and creating customer confidence in the banking industry.
  2. The study will also prove that these reforms will enable adequate growth on investment and improving on the Nigerian economy.
  3. The result obtained from this study will help decision-makers, the shareholders of these banks, the investors as well as the general public in good decision
  4. This research work will help to discourage the belief among the general public that the purpose of these reforms is not to witch-hunt enemies or to benefits friends and families by the central bank governor.
  5. The result obtained from this study will encourage the commercial banks who for now have been apathetic to these reforms to accept it, regardless of the immediate tension it may generate but for the future benefits that the reforms has to offer.

The researcher does not find it easy with the study as the materials needed for it were scarcely available and could not find any textbook that has written on reforms as a topic.

Most of the information used in this study were obtained through the internet, hence costing the researcher a lot.

The researcher covered both the expert and non export in finance.

In the quest to gather the materials needed for this project, access to its data were somewhat refused having it as classified information.