Financial Sector Reforms and Banking Regulation in Nigeria

Abstract

Reforms are a popular term in financial literature. It is concerned with the various steps taken by different governments in different countries to put their financial system in a healthy state. In this study, the authors identified the banking industry as one of the main sub-sectors of the financial sector. Consequently, any reform in the financial sector has a direct impact on the banking sub-sector. Also, the authors identified the objectives of financial reforms to include the removal of inefficiencies in financial intermediation, maintaining stability, and sound financial system. It is therefore imperative that the growth of any economy is dependent on the state of the financial sector. The findings showed that banking is the most regulated business in the world because of its function of providing a meeting place for lenders and borrowers. To ensure the safety of depositors’ funds, the banking industry in Nigeria has passed through different phases of regulation since banking started in Nigeria in 1892. The period 1892 to 1951 is regarded as a period of free banking era because there were no regulations. The period witnessed the advent and collapse of so many commercial banks. This event involved the enactment of the banking ordinance of 1952. This was the first attempt to regulate banking activities in Nigeria.