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Product Category: Projects

Product Code: 00000696

No of Pages: 70

No of Chapters: 5

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Many developing countries that are experiencing deepening crisis of confidence, manifested increase incidence of bad debts, large number of technically insolvent institutions, liquidity problems, accumulated losses and technically distressed institutions have now resorted to their financial sector reforms. These policies are usually carried out in the form of comprehensive Structural Adjustment Programmes. Thus the object of this study is to analyse the effect of financial sector reforms on the performance of the banking institutions in Nigeria.

In carrying out this research work, data were obtained through the use of secondary data. This data comprises of information collected through uses of relevant journals, newspaper, internet, seminar papers, CBN Annual Reports, CBN statistical bulletin. Besides, multiple regression analysis method was used to test the hypothesis in order to arrive at a logical conclusion.

The findings of the study depicts that market capitalization was influenced by total credit, total investment, total deposit, bank loans and advances and number of bank branches in operation.

However, recommendations were given to both the government and the banks on how best to improve the financial sector. Such recommendations may include strengthening the supervisory agency and the attitude of banks to customers in general. With implementation of the aforementioned recommendations, there is an assurance that banking sub-sector of the Nigerian financial sector will experience a positive performance in the economy growth. The study has been subdivided into five parts with each aspect dealing with different aspects of the subject matter to follow a sequence.

The first part deals with the introductory aspect, the second part embodied a review of related literature. The methodology of the study is dealt with in part three. Part four incorporates the presentation, analysis and interpretation of data collected from the field while the final part dealt with conclusion and recommendations.




















1.0        Background of the Study

1.1        Statement of Problem

1.2        Research Question

1.3        Research Hypothesis

1.4        Relevance of the Study

1.5        Methodology

1.6        Organization of the Study

Definitions of Terms




2.0        Introduction

2.1        Concept of Financial Reforms

2.2        The Regulation of supervision of the financial sector and their Rationale

2.3        Institutional Framework for Regulation and Supervision in Nigeria

2.3.1     The Nigerian Deposit Insurance Corporation

2.3.2     The Securities and Exchange Commission

2.3.3     The Nigeria Insurance Supervisory

2.3.4     The Financial Services Regulatory Coordinating Committee

2.4        Appraisal of Performance and Challenges for the Bank Financial Sector

2.5        Broad Objectives of Banking Reforms

2.6        Grand Performance of the Banking Institution (2002-2004)

2.7        Interest Rate Restructuring

2.8       Exchange Rate Stabilization

2.9       The Benefits of Financial Sector Reforms Banking Institution ­References



3.0       Introduction

3.1       Population of the Study

3.2       Restatement of Hypothesis

3.3       Model Specification

3.4       Method of Data Collection

3.5       Method of Analysis

3.6       Scope and Limitation of the Methodology





4.0        Introduction

4.1        Data Presentation

4.2        Pre-Financial Sector Reforms

4.3        Post-Financial Sector Reforms

4.4        Summary of Findings and Policy Implication




5.0        Summary

5.1        Recommendations

5.2        Conclusion & Findings















Reforms are predicated upon the need for re-orientation and repositioning of an existing quo in order to attain an effective and efficient state. There could be fundamental bottlenecks that may hinder the appropriate functioning of institutions for growth and the achievement of core objective in the quest of enhancing and sustaining the economic and social imperatives of human endeavor carried out through Government Institutions or private enterprises, Reforms become inevitable in the light of global dynamic exigencies and emerging landscape.


Consequently, the Financial Sector as an important sector needs to be reformed in order to enhance its competitive investments. As already established, financial sector Reforms has been an integral part of the economic reforms which began in Nigeria in the Mid 1980s with the adoption of the Structural Adjustment Programmes. Four phases of banking sector reforms are easily discernable in Nigeria since 1986.


The first is the financial system Reforms which led to deregulation of the banking Institution, in addition to credit, interest rate and foreign exchange policy reforms. Thu~, culminated to rapid expansion of the banking institutions from about 40 commercial and merchant banks with a combined branches network of about 1,655 in 1986 to 121 and about 2,385 branches in 1992. {CBN 1993}.

The second phase began in the late 1993-1998, with the re­introduction of regulations. During this period, the banking institution suffered deep financial distress which necessitated another around of reforms, designed to manage the distr5ess. The Third phase began with the advent of civilian democracy in .1999 which saw the reform return to liberalization of the financial sector, accompanied with the adoption of distress resolution programmes. While some of the bankrupt banks were liquidation about 89 of them survived and had about 3,382 branches predominantly in the urban centre as at June 2004. {Soludo 2007}. sestdes, universal Banking was introduced during this time and which avail our banks the opportunity to diversify their portfolio to cover all aspect of retail banking. Upon assumption of duty as CBN Governor {Soludo 2007}, asserted that the financial system was saddled with structural and operational weaknesses and that their utmost role in promoting private sector led growth could be further enhanced through a more pragmatic reform which began since then.


The Nigeria Financial System {NFS} has over the years, undergone remarkable changes in terms of the number of institutions established, ownership structure, the depth and breath of the financial markets subject to the economic environment under which it operates and the regulatory framework. Apart from the regulatory and supervisory bodies, we can group institutions operating in the system under the Money Market, Capital Market, Finance Institution, Banks, Non-Banks Financial Institutions etc.


Many developing economies, including Nigeria that are experiencing large debt burden and dwindling foreign exchange earnings have now resorted the deregulation of their financial institutions. These policies are usually carried out in form of a comprehensive structural adjustment programme, Nigeria has already embarked on the deregulation of her financial system.


According to {Omoruyi, 1994}, CBN {2004} - That the objectives of Financial Sector reforms are mostly the same in most countries of sub-Sarah Africa. Broad objectives of financial sector reforms in Nigeria include:

i.               To ensure efficient allocation of resources to the real sector economy to promote domestic economy.

ii.      To reduce excess liquidity in the financial system so as to curb inflationary trend.

iii.     To establish a realistic and sustainable rate for the naira.

iv.     Expanding the saving mobilization I based in support of investment and growth through market based interest rate.

v.            Improving the regulatory frame work and procedures so as to forestall distress.

vi.     Fostering competitive in the provision of banking services


Among the policy instruments often employed to attain these objectives are:

i.                    Foreign exchange markets and interest rate deregulation.

ii.                  Adoption of market based approach to credit allocation.

iii.                Pursuit of sustainable fiscal and monetary policy.

iv.   Active use of prudential restructuring and enforcement of capital adequacy requirements.

v.     Reforms or restructuring of financial markets via legislature changes.


In general, the extent of economic reforms is often guided by the severity of internal economic distortions and the adversity of the disincentives created especially for a private sector led growth.


By the end of 1985, it became apparent that nothing less than a comprehensive Structural Adjustment Programme would salvage our economy. This therefore led to the introduction of Structural Adjustment Programme in the second Quarter of 1986, following the nationwide public rejected {through public debate} of the loan from international Monetary Fund {IMF} according to {Ojo, 1983}.


The objectives of Structural Adjustment Programme include the following:

i.                    Improved efficiency of the public sector.

ii.                  Improved fiscal discipline and balance of payment.

iii.    Restrictive and diversity of the productive base of the economy in order to reduce dependence on the oil sector and imports.

iv.   Reduce the dominance of unproductive investment in the public sector.

v.     Stimulate domestic financial and efficient resource allocation.

vi.   Intensifying the growth potential of the private sector.



Prior to the introduction of Structural Adjustment Programme, the Nigerian Financial System had been characterized with immense Structural and operational weakness and which have made the banking institutions not attaining the limelight. However, the wake of Structural Adjustment Proqramrne tend to set the landmark for a virile financial system in Nigeria. In the pursuit of financial sector reform, focus have been shifted to address some impediment to the growth of the Nigerian financial system. Amongst are:

i.                   Attending to the problem of inability to cope with changes of the policy measure.

ii.        Ineffective monitoring of the expansion In size of the banking institution brought about by the deregulation authorities {CBN and NDIC}.

iii.     Problem of mismanagement and which resulted into bank distress.


However, In attending to the plight mentioned, measures have been taken to consolidate the banking institutions, achieving a foreign exchange market stabilization, restructuring of the interest rate, currency restructuring and pursuit of stabilization for monetary and inflation controls


The assumption is that the effect of financial sector reform on the performance of banks in Nigeria has been commendable, Some of the indicators are supply and improved access to credit, increased returns to investor, reduced distress ratios and above all, improved profit earnings.



The major objective of this study is to analyze the effect of the financial sector reforms on the performance of the banking institutions in Nigeria. Besides, it tends to achieve the following:

i.               To appraise what constitute the financial sector in Nigeria.

ii.      To identify how financial sector reforms have improved the performance of banking institution in Nigeria.

iii.     To examine how financial sector reforms have brought competition among banks in the industry



Relevant research questions that will, be addressed by the research include:

i.              Does the financial sector reform lead to an. increase in the number of depositors?

ii.      Does the financial sector reform enable the banks to increase their earnings and profitability?

iii.        Has the overall size of banks expanded as a result of financial sector reforms?

iv.     Does financial sector reforms leads to competition among banks?

v.           Does the financial sector has any negative effect on bank performance?

vi.    Has the financial sector' reforms ensured efficient allocation of resources to the productive sector of the economy?

vii.   Should Government continue with the exercise?

viii.  What is the effect of financial sector reforms on the level of depositors?

Ix      Is the financial sector reform responsible for bank distress?




Hi:       That financial sector reforms have improved the performance of Banking Institution in Nigeria.

H0:      That Financial sector reforms have not improved the performance of Banking Institution in Nigeria.

Hi:       That Financial sector reforms have brought competition among banks in the industry.

H0:      That Financial sector reforms have not brought competition among banks in the industry.



The research work is expected to be of immense benefit to various interest groups such as Government policy formulators Mangers, Students and General Public.


In the first place, thus work will be of great use to Bank Managers, as it will stand as a guide to various officials of banking policies and bring to light, the effectiveness survival strategies that are available in a reformed financial system.


In addition, it would enable the government policy formulators to examine the effect of financial sector reforms on the performance of banking institutions in Nigeria.

Moreover, the study would avail students and other individuals the opportunities to enrich their knowledge on the topic.


Finally, it would expose to the general public, the various banking policies adopted by the regulatory authorities during the period.




Data for this study will be based on secondary data collected from the Central Sank of Nigeria, Federal office of Statistics, Financial Journals, Nigeria Deposit Insurance Corporation, Securities and Exchange Commission, from the interaction and discussion with officials of Nigeria Stock Exchange as well as' publications by authors who are authorities in their various field.



The method to be used in analyzing the data collection shall be descriptive statistic to test the hypothesis that financial sector reforms has contributed significantly on the performance of the banking institution.

In order to ascertain the relative efficiency of the financial sector reforms, we posit that financial sector reforms will lead to an increase in profit before tax {PST}.



Analysis of data will be done using regression techniques. The variables to be used are defined below:

β0           =Constant Term

β1           =Coefficient of total credit (X1)

β2           =Coefficient of total deposit (X2)

β3           =Coefficient of total investment (X3)

β4           =Coefficient of bank loans and advances (X4)

β5           =Coefficient of branch network (X5)


Which is an index of Total Deposit of banks, Loans and advances, Number of bank branches Market Capitalization and Asset base of banks?



The purpose of the study is to analyze the effect of financial sector reform on the performance of the banking institution in Nigeria. This study will be carried out in five {S} chapters.

CHAPTER ONE: This will principally be' an introduction to the study. It will give a view of the background of the study and at the same time unfolds a run-down on all that is entailed in the study.

CHAPTER TWO: A review of literatures of past work done by other researchers will be made. The framework of the body of study shall be outlined in progression.

CHAPTER THREE: This will describe the procedure and methodology to be used in this study. It will also unveil a detailed view of the main issues of this work.

CHAPTER FOUR: This will entail the analysis of the data collected and the interpretation of results, statistical text will be employed to determine relations of variables.

CHAPTER FIVE: This will be a summary of the work based on the findings.




i.                    BANKING POLICIES: These are the rules, regulation, directives and procedures from government to guide and control the activities and transactions in the banking and other Non-banking financial Institutions"

ii.                  THE ECONOMIC STABILIZATION ACT OF 1982: This contained a package of fiscal, Monetary and Exchange Control measure which aimed at co-serving the country's foreign Exchange.

iii.                ARMCHAIR BANKING: This is a banking system whereby all the bank employees stay comfortable within the banking premises waiting for the depositors to place his or her money as opposed the banking system whereby the banks market for depositors which came into existence after the adoption of Structural Adjustment Programme.

iv.                CONSOLIDATION: This is viewed as the reduction the number of banks and non- bank financial institutions and other deposit taking institutions with a simultaneous increase in size and concentration of the consolidates entities in the sector. BIS {2110}

v.                  CONVERGENCE: This involves the consolldatlon of banking of banking and other types of financial service like Securities and Insurance {FRBSF Economic Letter 1998}.

vi.                REGULATORY/MONETARY AUTHORITIES: These include the CBN, NDIC and the Federal Ministry of Finance who are involved in the monitoring system.

vii.              DECREE 24, OF 1991: This refers to the Central Bank under financial Institutions Decree of

viii.            DECREE 25, OF 1991: This refers to the Central Bank" of Nigeria decree promulgated in 1991 {CBN Decree 1991}.

ix.                DECREE 53, OF 1989: This Decree gives -legal backing to the establishing of the primary mortgage financial institution.

x.                  APEX BANK: This refers to the Central Bank of Nigeria.

xi.                STRUCTURAL ADJUSTMENT PROGRAMME: This is a programme introduced in 19866 by General Ibrahim Babangida through the International Monetary Fund {IMF}. In order to restructure Nigeria economy on the path of balanced growth by freeing the economy from the strangle hold regulation {Aluko 1992}.

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