The main objective of the study is to ascertain the impact of banking reforms on Bank performance in Nigeria. The specific objectives are: 1. To determine the effect (s) of banking reforms on bank performance in Nigeria. 2 To assess the impact of interest rate restructuring on bank’s performance in Nigeria. 3 To determine the impact of Bank Recapitalization /consolidation on bank’s performance in Nigeria.

1. THE IMPACT OF BANKING REFORMS ON BANK PERFORMANCE
IN NIGERIA
Reforms are predicated upon the need for reorientation and repositioning of an existing status
quo in order to attain an effective and efficient state. There could be fundamental bottle-neck that
may inhibit the functioning of the institutions for growth and the achievement of core objectives
in the drive towards enhancing and sustaining the economic and social imperatives of human
endeavor. Carried out through either government institutions or private enterprises, reform
becomes inevitable in the light of the global dynamic exigencies and emerging landscape
(Somoye, 2006).
In terms of policy thrust therefore the banking sector reforms are expected to build and foster a
competitive and healthy financial system to support development and avoid systemic distress
(Soludo, 2007). Thus Balogun (2007) averred that banking sector reforms is interpreted to mean
embarking on comprehensive process aimed at
Substantially improving the financial infrastructure, strengthening the regulatory and supervisory
framework to address the issue of low capitalization and a structured financing for cheap credit
to the real sector and financial accommodation for small and rural credit schemes. In most cases,
bank reforms are embarked upon to forestall banking crises or cushion the effects of a recent
crisis. Banking sector reforms have come into play due to banks inability to meet up to required
obligations or satisfy their stakeholders which overtime have led to subsequent failures and
crises. A banking crisis can be triggered by weakness in banking system characterized by
persistent illiquidity, insolvency, undercapitalization, high level of non-performing loans and
weak corporate governance, among others. (Adegbaju and Olokoyo, 2008).

2. The reforms carried out in Nigerian banking industry which started from July 6 2004 was done
primarily to meet the developmental challenges of the 21st century. In his words, Professor
Charles Soludo, the governor of Central Bank of Nigeria from June 2004 to June 2009 said that
the reforms were to engender exchange rate and price stability, managing interest rate for
stability and development of macroeconomic coordination, vigorous pursuit of the
developmental roles of the CBN, improvement of the payment system, financial sector
diversification and regulatory reforms and strategies for integrating the Nigeria’s financial
system into the African regional and global financial system. He further emphasized his desire to
concentrate on the theme of banking sector consolidation. Strengthening and consolidating the
banking system was to constitute the first phase of the reforms designed to ensure a diversified,
strong and reliable banking sector which will ensure the safety of the depositor’s money, play
active developmental roles in the Nigerian economy and be competent and competitive players
in the African regional and global financial system. The reform was to support the banks to
become strong players for good health, long live and positive contributors to the economy.
Depositors were expected to have sweet dreams in aftermath of this reform. With the universal
Banking system which was introduced in 2000, banks became one stop shops offering a range of
financial services, insurance, mortgage, stock broking, investment, banking etc. Unfortunately
after the observation that the banks were putting shareholders’ funds at risk and not
concentrating on their areas of core competence, the central Bank of Nigeria on 15 March 2010
announced the phasing out of universal banking within the 18 months. All these reforms had
taken place but the benefits especially as it relates to bank performance is still a doubt to many
people.
1.0 STATEMENT TO THE PROBLEM
Oloyode (1994) observed that the banking sector over the years has been faced with so many
crises and some fraudulent practices. These crises led to the recent reforms in the banking system
one of which was merger and acquisition of banks. Oke (2006) observed that the inconsistency in
monetary reforms and regulatory policies as a major setback to banks stability as the surveillance
and regulatory measures of the Central Bank of Nigeria (CBN) have unfortunately been unable
to keep the pace with the rapidity of the changes in the financial system.

3. One objective of the reform is to create a sound and more secured banking system that depositors
can trust. These banking reforms were expected to address the problem faced by the banks and
other technically insolvent institutions without an initial resort to liquidation, with all its adverse
consequences for deposits. These problems encountered by the banks before the reformation
according to Lemo (2005) were as follows:
a. Weak corporate governance, evidenced by high turnover in the board and management
staff, inaccurate reports and non compliance with regulatory requirements.
b. Late or non publication of annual accounts that obviates the impact of market discipline
in ensuring banking soundness.
c. Poor risk management practice.
d. Operation at level lower than that which could deliver competitive return on equity.
e. Poor asset quality.
f. Poor quality services and diversified delivery channels.
g. Thin spread of qualified and experienced man power.
h. Heavy reliance by banks on government patronage.
i. Gross insider abuses, resulting in huge non performing insider related credits.
j. Weak capital base, the minimum capital base before the reforms was N2 billion which is
approximately $15 million. But after the reform the minimum capital requirement stood
at N25 billion, approximately $250 million.
According to Soludo (2007), the Nigerian banking system has undergone remarkable changes
over the years. Regimes in Central Bank of Nigeria have always geared up towards the
avoidance of banking distresses and its attendant consequences as witnessed in Nigeria in the
past. These changes have been influenced largely by challenges posed by the reforms in an
attempt to consolidate and strengthen the banking system and solve the problem of illiquidity
and distress, and to restore public confidence in the sector. However, the correlation between
these sets of reforms and banks performance has not been clearly ascertained.
1.1 OBJECTIVES OF THE STUDY

4. The main objective of the study is to ascertain the impact of banking reforms on Bank
performance in Nigeria. The specific objectives are:
1. To determine the effect (s) of banking reforms on bank performance in Nigeria.
2 To assess the impact of interest rate restructuring on bank’s performance in Nigeria.
3 To determine the impact of Bank Recapitalization /consolidation on bank’s performance in
Nigeria.
1.4 RESEARCH QUESTIONS
The research questions were formulated to address the research problem and the research
objectives as discussed above. Three principal research questions were answered in this study.
They are:
1. Do bank reforms have any effect on bank’s performance in Nigeria?
2. How does interest Rate restructuring impact on bank’s performance in Nigeria?
3. Has bank recapitalization /consolidation had any impact on bank’s performance Nigeria?
1.5 RESEARCH HYPOTHESIS
Based on the research questions above the following hypotheses were designed to guide the
course of study
1. Bank reforms do not have any effect on bank’s performance in Nigeria.
2. There is no significant impact on bank’s performance by interest Rate in Nigeria.
3. Bank Recapitalization/consolidation does not significantly impact on bank’s performance
in Nigeria.
1.6 SCOPE OF THE STUDY
The research covers all the reforms that have taken place in the Nigerian Banking system within
the period 2000 – 2008.
1.7 SIGNIFICANCE OF THE STUDY
One of the major significance of the work includes the evaluation of the banking reforms in
terms of its impact on efficiency in the Nigerian banking sector. At the en of this study, the
following shall benefit.

5.  Government of Nigeria at respective levels: Federal, State and Local Government in
seeing the way to propound laws to care for the problems of the monetary policies of the
bank.
 The bankers in seeing how to execute their works in order to bring about a fair and sound
financial system.
 General public in understanding how the reforms have helped the banking sector.
1.8 OPERATIONAL DEFINITION OF TERMS
Consolidation: This occurs when two companies combines into one for either a
business or other purposes.
Mergers: A merger occurs when two or more companies transfer their businesses and asset to a
new company and in consideration; their members receive shares in the transferee company
Acquisition: An acquisition occurs when one company acquires sufficient shares in another
company so as to control that other company. This may be inform of take over bids or by
purchasing shares in the market
EDITOR SOURCE: The Impact Of Banking ReformsOn Bank Performance In Nigeria