Bad Loan, Bank Credit and Deposit Mobilization in Nigeria: The Aftermath of the Global Financial Crises

Abstract

The concept of globalization has come to most countries of the world primarily as a necessity and rarely a matter of choice. For most countries, the sector that first gets entangles with the global web is the financial sector, no doubt, because of the pivotal role performed by this sector. Nigeria has not been left out. The nation’s financial sector did all it could in order to be counted and recognised among the leading financial institutions of the world. Their effort was compensated with the weight and dimension of juicy foreign capital that flowed into the banking industry during and after bank consolidation. They were soon to learn that globalisation also carries with it, a baggage of complications which implies that an error of judgement or recklessness on the part of partnering nations can have a direct impact on other nations that are part of the web, the soundness of their banking practice notwithstanding. The effect was the build-up of non-performing loans, low savings and deposit mobilisation and a depressed economy. For the purpose of this study, two periods were identified; pre-consolidation (1999-2003) and the post consolidation period (2004 – 2008). We employed data from CBN annual reports using the ordinary least square regression method to establish that the non-performing loans that were the direct effect of the financial crises affected loans and advances and the savings and deposit mobilization of banks. We recommend that Nigeria should first develop an effective local policy before looking forward to benefitting from global affiliation.