Bank-Recapitalization And The Growth Performance Of Nigerian Banks

Bank- Recapitalization And The Growth Performance Of Nigerian Banks (1986-2007)


This paper reviews the perspective of banking recapitalization and growth performance in Nigeria, since 1986 to date. It notes four eras of banking sector reforms in Nigeria, viz: the post-SAP (1986-1993), the Reforms Lethargy (1993-1998), Pre-Soludo (1999-2004) and post Soludo (2005-2007). Using both descriptive statistics and econometric methods, three sets of hypothesis were tested: firstly that each phase of reforms  culminated in improved incentives; secondly that policy reforms which results in increased capitalization, exchange rate devaluation; interest rate restructuring and abolition of credit rationing may have had positive effects on real sector credit and thirdly that implicit incentives which accompany the reforms had salutary macroeconomic effects. The empirical results confirm that eras of pursuits of market reforms were characterized by improved incentives. However, these did not translate to increased credit purvey to the real sector. Also while growth was stifled in eras of control, the reforms era was associated with rise in inflationary pressures. Among the pitfalls of reforms indentified by the study are faulty premise and wrong sequencing reforms and a host of conflicts emanating from adopted theoretical models for reforms and above all, frequent reversals and/or non sustainability of reforms. In concluding, the study notes the need to bolster reforms through the deliberate adoption of policies that would ensure convergence of domestic and international rate of return on financial markets investments.   Continue reading Bank-Recapitalization And The Growth Performance Of Nigerian Banks