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Financial institutions play an important role in mobilising savings from surplus economic units and channelling them to deficit economic units for investment.

The financial system serves as the central nervous system of any economy, particularly a market economy. It is made up of several different but interconnected components, all of which are necessary for its effective and efficient operation.

Financial intermediaries (institutions) such as banks and insurance companies that act as principal agents for assuming liabilities and acquiring claims (i.e. accept deposits and make payments); the financial market in which financial assets are exchanged; and the financial instruments that are required for the effective interaction of the intermediaries in the markets are the three main interconnected components.

These three elements are intricately linked. Banks require payment system infrastructures (instruments) to safely exchange claims, and markets to provide a channel for their intermediation activities. Only when these three components are present and robust does the banking system function more effectively and efficiently.

It is against this backdrop of the banking system’s critical and strategic role in national economic development that the issue of banking reforms becomes imperative, even though most reforms have been reactive rather than proactive, particularly in Nigeria and other developing economies.

The financial sector is undeniably an important element of a country’s economy, and any reforms implemented in the financial sector ripple out to other sections of the economy, constituting a watershed moment for the economy and its people.

Financial sector reforms, on the other hand, have been a consistent characteristic of the financial system. Reforms have evolved in response to systemic issues such as systemic crises, globalisation, technological innovation, and financial catastrophe. Nigeria’s financial reforms extend back to 1952, when the Banking Ordinance was implemented.

The Structural Adjustment Programme was sparked by the liberalisation of banking in 1986. The 1986 financial system reform witnessed a policy transition from direct control to a market-based financial system,

particularly in terms of monetary management, risk management, and the institutions’ asset holding capacity. A number of further reforms followed, including banking consolidation in 2005 and insurance in 2007.

To be clear, the financial sector does not solely refer to the banking sector; the banking sector merely has a significant stake in the financial sector of the economy, making it more visible than other sectors.

We also have Non-Bank Financial Institutions (NBFI), which include insurance companies, discount houses, unit trusts, and capital market institutions that trade bonds, stocks, and other securities, determine interest rates, and produce and deliver financial services globally. Money and capital markets, as well as the financial system that supports them, are fascinating areas of study.

The capital market has also undergone numerous revisions over the years and continues to do so, particularly in terms of the capital needs of the operators, the operational and ethical standards of the institutions, and the market mechanism’s modalities.

The system improvements had a favourable impact on the growth of the financial system and the economy in general. What happens on a daily basis in these markets and throughout the financial system has a significant impact on the economy. Broad changes are constantly changing the financial sector as new institutions, methods, issues, and services emerge.

Reforms frequently strive to act proactively to strengthen the system, prevent systemic crises, strengthen market mechanisms, and uphold ethical standards. Recent reforms in the banking sector include the abolition of universal banking, a reduction in the tenure of bank MD/CEOs,

the establishment of an Asset Management Company whose sole responsibility is to buy back toxic assets from banks in need and return capital to the banks, improve liquidity, and lay the groundwork for the Central Bank of Nigeria to exit from the affected banks.

Financial reform is a possible modification made to a household, system, firm, government, or economy in order for it to perform and operate more effectively and efficiently within the context of specified regulatory rules.

(Oke, 2008). Financial market and bank reform continue to be a driving factor in the growth and development of the financial sector in developed, developing, and emerging economies (including Nigeria).

The financial sector’s reform could be easily linked back to banks’ competitive actions, which were aided by the constant rise in government restrictions over the soundness of banks’ strong financial positions (John&kent, 2008).

Financial markets, particularly banks, continue to be the primary engine of economic growth in developing, developed, and emerging economies (including Nigeria).

It should be emphasised that Deposit Money Banks (DMBs) act as financial intermediaries in the mobilisation of available resources from surplus economic units to meet the needs of the economy’s deficit unit.

DMBs, the banking sub-sector, function as financial intermediaries, allowing them to readily influence the direction of available resources, so considerably influencing the rate of economic development.

Though banks mediate between global demand for credit and supply of deposits, for these to work effectively and efficiently, there must be a platform for fair and healthy competition,

which must be tolerated in the sector; this would imply financial sector reform and creating a perfect competitive situation, which would help to harmonise: numerous suppliers / buyers of roughly equal size, free flow of information, and homogeneous products and services.

Financial reforms have helped to facilitate capital formation and generate economic growth, but banks’ consistent and persistent financial intermediation roles have been able to foster national and international development by channelling resources into priority sectors for sustainable development.

Since the era of the Structural Adjustment Programme in 1986 to the present, the evolution of the Nigerian financial institution sector has been characterised by changes in structure, growth, and developing issues (see Ahmed, 1987; Lamberte, 1989; Soyinbo & Adekanye, 1992).

The financial system of established countries, third-world economies, and emerging markets is thought to have maintained the framework within which capital production occurs through the intermediation of financial institution operations (Akingunola, 2006).

As a result, financial market and bank reform in the twenty-first century involves processes of financial innovation, globalisation, and deregulation in the banking sector of advanced economies;

however, the operations of other financial institutions, if not checked, may affect the performance of banks in any economy (See John & Kent, 2008; Obadeyi, 2013, CBN, 2014).

However, the authorities should intervene in the operation of the banking system through the Central Bank of Nigeria (CBN) to correct the shortcomings of the price fixing mechanism in order to ensure that what is commercially rational for an individual bank also possesses approximate characteristics of social rationality as much as possible.

Thus, interest rates charged by banks are regulated in order to encourage savings mobilisation and assure sufficient investment for quick economic expansion.


Examining the nature of Nigeria’s financial sector challenges, arguments have been raised about the way and manner in which reforms were carried out by Lamido Sanusi, the former Governor of the Central Bank of Nigeria (CBN), whose actions have been viewed as playing a one-man show in a disintegrated gathering.

The key issue raised in this study, however, is the question of the potential long and short-run implications of recent financial sector reforms. By doing so, comparisons are made between previous and present changes to assess the true health of Nigeria’s financial sector and how far it has contributed to the nation’s economic development.

Lack of proper attention to the needs of the real sector of the economy, insufficient policy framework for financial development, and weak regulatory supervision in a highly liberalised financial environment allow banks to become overconfident, audacious, less transparent, and less accountable in the handling of their diverse portfolios of services are among the major problems.

Banks give disproportionate priority to financing general items over industry, agriculture, power, and the importing of finished goods over raw materials, plants, and equipment.

The real sector is a vital aspect of the economy that requires special attention, but it has long been neglected due to a lack of funding.

The government has implemented policies geared at accomplishing specific goals, such as interest rate caps and targeted sectoral programmes. These rules were implemented with the goal of allocating credit to priority industries and getting “inexpensive” support for their own activities (Fry, 1998).

The interest rate ceiling and quantity restrictions on loanable funds for specific sectors ensure that a larger share of funds are made available for favoured sectors, hampered financial intermediation because financial markets will only accommodate the government plan’s credit demand while ignoring risks.

Regulatory bodies tasked with overseeing financial institutions’ activities have relaxed, leading in less openness in financial records, inefficient processes, and, eventually, fraud and immoral practises.


As a result, the research intends to answer the following research questions:

i. How does financial reform influence emerging markets?

ii. How does financial reform improve Nigerian banking performance?

iii. What are the consequences of poor banking performance in an emerging market?


This research is required to determine whether financial changes have any effect on banking performance in Nigeria, a growing market.

Because of the relevance of this topic to the economy, related study has been conducted in several countries and parts of Nigeria. These studies include: (see Obadeyi 2014; Iganiga 2010; Dabo 2012; Ogunsakin 2015), all of which try to justify the impact of financial reform on banking performance in an emerging market.

When considering the importance of banking performance, which is a major organ in the financial sector of an expanding country like Nigeria, these studies cannot claim to be precise enough. Iganiga (2010) concluded that the monetary authorities should direct their efforts towards achieving a positive interest rate regime,

expanding the scope of financial reform arsenal including financial instruments, and improving the regulatory framework in his work on the evaluation of Nigerian financial sector reforms using behavioural models.

In Nigeria, lending rates must be reduced. Furthermore, the study made use of the leasing square analytical tool. In contrast, this study focused on the impact of financial reform on banking performance in emerging markets, and it used basic linear regression as an analytical technique to examine the impact of financial reform.

Dabo (2012) conducted research on the impact of financial emancipation on baking performance in Nigeria. In addition, Obadeyi (2014) conducted research in the city of Lagos,

Nigeria, which is more similar to our study. This research is primarily concerned with the banking industry in Ilorin, Kwara State, Nigeria.

As a result, the beauty of this study is that it would complement past studies while also serving as a stepping stone for future research.


The primary goal of this research is to examine the impact of financial reform on banking performance in an emerging market. The particular goals were to;

i. Examine the impact of financial reform on emerging markets.

ii. Examine the true situation of Nigerian financial reform on banking performance and how it has aided in economic development.

iii. Analyse the effects of a bank’s performance on an emerging market.


The following null hypothesis will allow this study to achieve its goal:

Ho1: no major association exists between financial reform and emerging markets.

Ho2: In Nigeria, there is no significant association between financial reform and banking performance.

Ho3: There is no statistically significant association between banking success and emerging market performance.


The paper is primarily concerned with The Effect of Financial Reform on Banking Performance in an Emerging Market Nigeria Experience. However, due to funding constraints and time constraints, the scope of this investigation is limited to the Ilorin central bank office. This study will span the years 2005 through 2015.


Capital Market: This is a market where buyers and sellers trade financial securities such as stocks and bonds.

Performance refers to the banking sector’s profitability, or how well or poorly it is performing.

Market capitalization is the total market value of the company’s outstanding shares.

exchanged Volume: the volume of stocks and bonds exchanged in the stock market during a given year.

All Share Index: a daily calculation of the overall share performance of quoted companies in both the banking and nonbanking sectors.

A share is a portion of a company’s ownership.

Bank: a financial intermediary (institutions) that serves as the major agent for assuming liabilities and obtaining claims (accepting deposits and making payments).


This study’s report would be divided into five chapters;

The first chapter is an introduction to the study.

The second chapter is a review of pertinent literature.

The third chapter discusses the study’s research methods.

The fourth chapter is about data display and analysis.

The fifth chapter would provide a summary of the investigation, a conclusion, and a recommendation.

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