THE IMPACT OF FINANCIAL SECTOR REFORMS ON THE BANKING SYSTEM DEVELOPMENT IN NIGERIA
ABSTRACT
    In this research attempt was made to examine various theories of financial sector and banking system, and to examine more critically, the impact of financial sector reforms on the banking system. In Nigeria between 1990 to 2010. It also examined more holistically the instruments used by monetary authorities to manipulate the ability of banking system using the ordinary least square method (OLS).
    It was discovered that monetary policy has both negative and positive relationship with the banking system.
    The positive relation comes from market capitalization while the negative effect comes from the interest rate by the banks. The market capitalization is very significant to financial sector while the inflation rate is not significant.
    It was recommended that since the market capitalization (MCAP) is seen to be a positive and high indication of the ability of financial sector on the banking system, the central bank should endeavour to put policies in place that will enhance high and stable reserves in the economy.
TABLE OF CONTENT
CHAPTER ONE: INTRODUCTION
1.1    Background of the Study        
1.2    Aims/Objective of the study                     
1.3    Scope and limitation of the Study            
1.4    Significance of the Study                
1.5    Statement of the Problems and Questions     
1.6    Statement of Hypothesis                 
1.7    Research Methodology                 
CHAPTER TWO: LITERATURE REVIEW
2.1    Need for banking sector reform             
2.2    Broad objectives of financial sector reforms         
2.3    Financial sector reforms, macroeconomic instability are the order to economic liberalization         
2.4    Financial sector reforms and macroeconomic outcomes                             
2.5    Political economic considerations for financial sector reforms.                             
2.6    Financial sector reforms: lessons from other
countries                             
CHAPTER THREE: RESEARCH METHDOLOGY
3.1    Method of data analysis                 
3.2    Model specification                     
3.3    Source of Data                        
CHAPTER FOUR: EMPIRICAL ANALYSIS
4.1    Introduction                             
4.2    Presentation of Result                    
4.3    International of results                 
CHAPTER FIVE: SUMMARY, RECOMMENDATIONS AND CONCLUSION
5.1    Summary of Findings                     
5.2    Recommendations                
5.3    Conclusion                         
    Bibliography                         
    Appendix                             
CHAPTER ONE
INTRODUCTION
1.1    BACKGROUND OF THE STUDY
    The financial sector is more than just institution that facilitates payments and extends credit. It encompasses all functions that direct real resources to their ultimate user. It is the central nervous system of a market economy and contains a number of separate, yet co-dependent, components all of which are essential to its effective and efficient functioning. These components include financial functioning. These components include financial intermediaries such as banks and insurance companies which act as principal agents for component is the markets in which financial assets are exchanged, while the third is the infrastructural components, which is necessary for the effective interaction of intermediaries and markets. The third components are inextricably intertwined. Banks need payments system infrastructure to exchange claims securely and markets in which to hedge the risks arising from their intermediation activities.
    The financial sector therefore functions more efficiently and effectively when there is a robust and efficient payments systems infrastructure. Moreover the concern to ensure a sound banking system role of banks in national economic development. Banks for instance, mobilizes savings for investment purposes which further generates growth and employment. The real sector, which is the productive sector of the economy, relies heavily on the banking sector for credit. Government also raises funds through the banking system to finance its developmental programmes and strategic objectives. It is in view of economic development that the issue of a sound banking system, through proactive reforms becomes imperatives.
1.2    AIMS/OBJECTIVES OF THE STUDY
    Conceptually, financial sector reforms are undertaken to ensure that every part of the economy functions efficiently in order to ensure the achievement of macroeconomic goals of price stability, full employment, high economic growth and internal and external balances. Thus, banking reform in Nigeria is outcomes on economic performance. Thereafter, the pitfalls which militated against the effectiveness of the reforms would be identified and future policy options recommended. The main objectives are:
1.    To determine the effectiveness of financial sector reforms on the pricing of banks products and services offered to their customers.
2.    Financial sector reforms are undertaken to ensure that every part of the economy functions efficiently and effectively.
3.    To determine the effectiveness of deposit insurance scheme in Nigeria banks as a means to boosting depositors confidence in the system.
4.    To identify the impact of financial sector reforms on the banking system in Nigeria.

1.3    SCOPE AND LIMITATIONS OF THE STUDY
    The study will cover the operation of the financial sector reforms on the banking systems in Nigeria, the recent experience from the global financial crisis has further underscored the imperative of countries to embark on banking reforms on a regular basis. The world economy was hit by an unprecedented financial and economic crisis in 2007 to 2009 that resulted in a recession. This crisis led to the collapse of man world – renowned financial institutions and even caused an entire nation to be rendered bankrupt.
    In Nigeria, the economy faltered and was hit by the second round effect of the crisis as the stock market collapsed by 70 percent in 2008 to 2009 and many Nigerian banks sustained huge losses, particularly as a result of their exposure to the capital market and downstream oil and gas sector. Therefore, the CBN had to rescue 8 of the banks through capital and liquidity injections, as well as removal of their top executives and consequent prosecution of those who committed some infractions. These actions became necessary to restore confidence and sanity in the banking system, (Sanusi Lamido Sanusi).
1.4    SIGNIFICANCE OF THE STUDY
    The study is significant in that it will help depositors of funds in financial institutions to fully understand the mechanism of banking supervision and the provisions of the law as it enables to the deposit insurance scheme. It also provides a platform for the financial sector reforms to appreciate the impact of their activities on the banking industry, and underscores areas for improvement. It is also imperative to state that a stud of this nature provides an independent platform via which the financial sector reforms can appraise fundamental tools of supervision in a bid to make reasonable adjustments where necessary.
    The current reforms which began in 2004 with the consolidation programme were necessitated by  the need to strengthen the banks. The policy thrust at inception, was to grow the banks and position them to play pivotal roles in driving developments across the sectors of the economy. As a result, banks were consolidated through mergers and acquisitions, raising the capital base from N2 billion to a minimum of N25 billion, which reduced the number of banks from 89 to 25 in 2005, and later to 24.
    The finding of this study will be of immense benefit not only to  the Nigerian banking industry and its related institutions, but also to those interested in understanding the inter-relationship between the actions of the financial sectors reforms and the banking system as well as providing a platform for promoting an efficient and effective banking practice.
    The significance becomes more prominent when the impact of financial sector reforms on the banking system is examined against the background of the consolidation exercise of the present policies of the Central Bank of Nigeria. It is worth mentioning that the present state of the nation’s financial industry precipitated out of the supervisory framework of the central bank, hence this study would attempt to examine what present consolidation exercise would have on the financial sectors.
1.5    STATEMENT OF THE PROBLEMS AND QUESTIONS
    This research examined the extent to which the Nigeria banking sector has performed  as a result of various reforms carried out in the sector. Therefore, the broad research question is as the Nigerian banking sector performed well in the light of the reforms undertaken in the sector? In specific terms, the following questions are relevant:
1.    How do the various components of the reform affect the performance of banks?
2.    Has bank profits been affected by the reforms?
3.    Have the reforms been able to  eliminate bank failures?
4.    How do bank reforms affect the economy?
However, a holistic investigation into what went wrong in Nigeria leading up to the banking crisis in 2008 found eight interrelated factors responsible. These were macroeconomic instability caused by large and sudden capital inflows, major failures in corporate governance at banks, lack of investor and consumer sophistication, inadequate disclosure and transparency about the financial position of banks, critical gaps in the regulatory framework and regulations, uneven supervision and enforcement, unstructured governance and management process at the CBN/and weaknesses in the business environment. Each of these factors is serious in its own right. Acted together they brought the entire Nigerian financial system to their brink of collapse.
1.6    STATEMENT OF HYPOTHESIS
    Hypothesis is a tentative statement about a population parameter, which may be true or may not be true (Spiegel 2009).
    However, hypothesis is a  tentative statement about the relationship between two or more variables. A hypothesis is a specific, testable prediction about what you expect to happen in your study (internet). In the course of this study, the following hypothesis will be developed and empirically tested and their results will form the basis of conclusion and recommendations.
Ho:    There is significant relationship between banking sector reforms and the performance of banks.  
H1:    There is no significant relationship between banking sector reforms and the performance of banks.     
Ho:    There is relationship between financial sector reforms and the banking system.      
H1:    There is no relationship between financial sector reforms and the banking system.      
1.7    RESEARCH METHDOLOGY
This study investigate the performance of banking sector reforms in Nigeria while using descriptive statistics, regression models and  simultaneous equations.
The approach to be used for relevant data collection is through the use of the following: extractions from CBN publications, financial text books, newspaper, journals etc.