Developing Banking System Stability Index for Nigeria

Authors

Angela Sere-Ejembi, Central Bank of Nigeria, AbujaFollow
Ini S. Udom, Central Bank of Nigeria, Abuja
Audu Salihu, Central Bank of Nigeria, AbujaFollow
Ngozi V. Atoi, Central Bank of Nigeria, AbujaFollow
Baba N. Yaaba, Central Bank of Nigeria, AbujaFollow

Keywords

Banking system, stability index, macro-prudential analysis, financial soundness indicators

Abstract

This study constructed a banking system stability index (BSSI) for Nigeria, using a combination of financial soundness indicators and macro-fundamentals. It applied statistical and Conference Board Methodology normalisation processes on Nigeria’s banking and macroeconomic data from 2007Q1 to 2012Q2. The resultant index traced fairly well the episodes of crisis in the system over the study period. Hence, the BSSI is capable of acting as an early warning mechanism of signaling fragility. It could, therefore, be used as a complimentary regulatory policy tool to detect potential threat to enable monetary authorities take timely pre-emptive policy measures to avert crisis.

Author Bio

The authors are from Statistics Department, Central Bank of Nigeria, Abuja, Nigeria

Publication Title

CBN Journal of Applied Statistics

Issue

1

Volume

5

Recommended Citation

Sere-Ejembi, Angela; Udom, Ini S.; Salihu, Audu; Atoi, Ngozi V.; and Yaaba, Baba N. (2014) "Developing Banking System Stability Index for Nigeria," CBN Journal of Applied Statistics (JAS): Vol. 5: No. 1, Article 4.
Available at: https://dc.cbn.gov.ng/jas/vol5/iss1/4