Banking Sector Reforms and the Performance of Commercial Banks in Nigeria

Abstract

The study investigated the performance of Commercial Banks in Nigeria after Banking Sector Reforms. In order to be thorough, the performance of Commercial banks before the Reforms was also investigated. Here we analyze the relationship using Error Correction Mechanism and Chow test over the period 1970-2012. The Variables used were obtained from the banking system. The study found out that the reforms brought about some important changes in Commercial Banks Performance in Nigeria. Specifically, the level of profit (measured by NIM) continues to improve above single digit of 9.17 in 1996 to 16.18 in 2004 and a peak of 20.96 in 2011. This translates into a mean profit of 2.40 recorded in the deregulated period as against 1.54 recorded in the regulated period. Commercial Banks may improve in performance in terms of profitability, but may not really impact on the real economy at least on the short run. The study also shows that much of the benefits to commercial banks in credit creation in the economy will be derived at a price of time. A number of possible policy menu capable of bringing about a sustained Commercial Banks Performance in Nigeria in years following the study have been prescribed in the study.