Banking Reforms and the Effect on Economic Development of Nigeria

Abstract

This study examined the effect of banking reforms on economic development of Nigeria for the period 1986-2014. Data for the study were sourced from Central Bank of Nigeria Statistical Bulletins, publications of National Bureau of Statistics and Annual Reports of Deposit Money Banks. Ordinary Least Square (OLS) regression was employed for the analysis using Gretl 1.9.8 econometric software. The study revealed that Minimum Capital Base of Banks has a positive and significant effect on Gross Domestic Product. It was also found that Banks' Minimum Capital Base has a negative and significant effect on Inflation. However, it was observed that Banks' Minimum Capital Base has a significant positive effect on Unemployment. Thus, the study concluded that Minimum Capital Requirement of banks is a veritable reform on banks in Nigeria as it yields a positive result with regards to the economic development of the country. The study therefore, recommended that the monetary authorities should always take Minimum Capital Base of banks into consideration in banking reforms as it has the capacity to trigger economic development of Nigeria. Also, the study pointed out that the increase in Minimum Capital Base of banks should be done with caution so as not to increase unemployment.