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Banks hold the most critical position in the economy's financial structure. Between 1992 and 2002, a total of ten banks failed, indicating that something is seriously wrong.

A few questions have been raised. Although solutions have been proposed and future prospects have been discussed, none appear to have solved the problem.

This study is not adversarial to any other, but rather complementary. Other works have been used here and are appropriately acknowledged, but everything is done with the intention of finding a long-term solution to the problem of bank failure.

The major findings include inadequate attention being paid to the unorganised private sector in favour of the organised private sector (particularly merchant banks), a consistent erosion of their capital base due to the economy's inflationary trends, and a lack of attention being paid to research and development.

The problem of bank failure is not systemic, as only a few banks in the industry have failed, there is a lack of technical expertise in most banks, most bank promoters only seek initial capital rather than appropriation and compatible follows poor internal control systems, and finally banks are currently in liquidation.

The following recommendation was made in this regard. Banks should maintain a proper internal control system, place more emphasis on research and development, and place less emphasis on staff training.

They should also maintain paid-up capital structures that are relevant to inflationary trends. The should create an enabling environment, and promoters of compatible status and management should be technically skilled and dynamic.

To summarise, the Nigerian economy is still underdeveloped, and it will need the foresight of every Nigerian to pull it out of the doldrums. Only when the economy stabilises will we have a very stable banking environment in which failure will be reduced to a manageable level. This is not just a job for the authorities. Everyone has an important job to perform.


Nigeria's financial system has expanded dramatically over the last two decades. In pre-colonial and colonial days, it was characterised by an almost primitive shape. It has advanced to the point where economic specialists can happily thump their chests.

With regard to the owners of the institution, the regulatory framework, the instrument used, and the number of established institutions, Nigeria has the most advanced financial system in Africa.

Banking institutions have grown the most rapidly inside the Nigerian financial sector. In any case, given their crucial in a complicated financial system that supplies the economy's money and credit needs, this is just as well.

The term “world bank” or “banker” is not used or defined in a Central Bank of Nigeria (CBN) Decree No. 24 of 1991, nor in a Bank and Other Financial Institutions Decree (BOFIO) No. 25 of 1991,

but section 2 of the Bills of Exchange Act of 1881 states that bankers include a group of people, whether incorporated or not, who engage in the business of banking.

According to the Evidence Act, a banker is “any person or persons, partnership or carrying on the business of bankers.”

Finally, the Banking Act of 1969 defines a bank as “any person engaged in the business of banking,” which includes a commercial bank and an acceptance house.

Banks play a crucial part in the process of economic development because they mobilise funds from surplus spending and for the economy. In this method, the quantan of rotational savings and investment is increased.

Second, even though an adequate service was created increase as a result of financial investment projects by bank money. All of this contributes to the effective promotion of an efficient payment system, the formation of banking habits, the development of society, and the creation of job possibilities.

Given these features, it is easy to understand why a bank's failure has such far-reaching implications. The ability of banks to operate successfully is dependent on how well they are able to gain the public's confidence;

if the confidence is lacking, the gap will be too large for the banks to fill. In a nutshell, the following are the consequences of bank failure on Nigeria's economic progress.

a) Inadequate financial intimidation that is both effective and efficient.

b) Decreased public trust in the system leads to additional economic downturn. Increased regulatory load, increase of social calamity.

There is an urgent need to devise a variety of remedial measures for the sake of the citizens and economic progress.

The failure of a bank today does not imply that the occurrence is widespread.

There must be a way out of every bad situation.

The only snag is how these cures would be used effectively. Such remedies might include;

a) The establishment of a stable political climate.

b) Increasing the effectiveness of regulatory agencies

c) Banks that are in terminal decline are taken over by regulatory organisations.

d) Promoting financial literacy

e) The government's sincere pursuit of all economic and monetary policies.

f) In connection to the inflation rate, all legislation relevant to capital adequacy, minimum paid up capital liquidity ratio, and assist quality should be evaluated.

g) Privatisation and commercialisation of all government-owned banks.

h) All government-owned bank debt (, federal, and even parietals) should be repaid immediately.

i) All laws pertaining to bankruptcy and default should be revised and made more functional.

An address like this will go a long way towards resolving the problem and restoring public trust in the system.


Given the critical role that banks play in developing the national economy as sources of funds for savings, investment, and job creation, it is important to note that the Nigerian banking system,

despite its advancement and sophistication, has yet to effectively achieve this mission. The reason is not merely that some banks have failed, but that some have succeeded.

Factors have continued to reflect on the successful performance banks. The problem of economic inefficiency in Nigeria may potentially be linked back to the fact that banks have been responsible for the situation in which they now find themselves.

The consequences of a bank failure range from the loss of depositors' funds to a loss of confidence (which is the springboard on which the bank's business of banking is built) to a total lack of effective financial intermediation, such as reduced lending to the priority sector of the economy and increased distress in other sub-sectors.

The problem of bank failure is not unique to Nigeria, nor is it exclusive to the developing world. It is ubiquitous, and the causes fall into the same identifiable groups. The distinction resides in the various ways in which the situation can be resolved.

Bank failure is caused by inadequate management (both shareholder and management executive), insufficient capital, poor internal control, poor asset quality, and factors such as the economic, socio-political, and government environments.


The purpose of this research is to evaluate “Bank failure and economic development.” This is the influence of bank failures on the development of the Nigerian economy in order to emphasise the repercussions on depositions.

The general public, the effect bank, the entire banking industry, and the broader macro-economy will be presented with an agenda outlining how the tide can be stemmed and the crisis dealt with effectively.

The research will continue to uncover the future of banking.


This study is significant in that it is a careful examination with the purpose of revealing the causes of bank failure and how to avoid bank failure in the case that prevention is not possible.

The research will be extremely beneficial to banking scholars, regulatory agency officials, and banking intellectuals.


Some of the technical words that will be used in the following chapter will be thoroughly clarified in this sub-section to ease absorption of the study capital adequacy material.

This is the asset quality ratio of classified loans and advances to shareholders. This is the proportion of classified loans and advances to total loans and advances. The proportion of capital that a bank is required to keep in relation to risk assets.

Risk assets are assets that, by definition, are prone to losses.

The liquidity ratio is the proportion of liquid assets to total deposit liabilities.

Illiquidity refers to a bank's ability to meet its liabilities when they come due.

Irosolvency occurs when the value of the realisable assets is less than the total amount of the liabilities.

Liquidation: The acquisition of assets once the bank has been adjusted.

Holding actions are actions that prohibit or limit specific activity of boards and management, or activities that are required of them to ensure bank safety.

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