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Bullion

Keywords

Nigeria, Financial Sector, Economy.

Abstract

This paper examines major developments in the Nigerian financial sector and discusses efforts made so far by the authorities to restructure the sector so as to enhance its efficiency. Major Developments in the Financial Sector The Structural Adjustment Programme (SAP) which was adopted in 1986 was the nation's inevitable response to the suffocating effect of the external debt burden on the Nigerian economy, the escalating fall in agricultural productivity, and undue dependence on petroleum as a foreign exchange earner. The paper noted that the increase in the number of banks resulted in competition for bank deposits and other patronages from bank customers. However, the decision of the Federal Government to withdraw public-sector deposits from commercial and merchant banks in 1989 exposed the fragility of the funding base of many banks. The liquidity crisis that ensued from that directive, necessitated the granting of CBN/NDIC Accommodation Facility to a number of distressed banks in order to sustain public confidence in the banking system. To meeting the challenge of this financial sector distress, the need to enhance supervisory practice and performance to meet international standards is stressed with specific reference to: instituting a new legal framework; introduction of deposit insurance; prudential guidelines; equity participation of banks in the business of their customers; quality of management; review of supervisory methodology; and establishment of credit bureau. The paper concludes that for the Nigerian economy recover with vigour again, its financial sector must be properly re-structured and re- invigorated by the multiple participants in the Nigerian economy which includes government which is responsible for fiscal discipline; the operators who must embrace probity and professionalism; and the regulators whose efforts require coordination for effective service delivery.

Author Bio

The author is the Deputy Governor of the Central Bank of Nigeria.

Publication Title

CBN Bullion

Issue

4

Volume

17

Included in

Finance Commons

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