IIARD International Institute of Academic Research and Development

IIARD INTERNATIONAL JOURNAL OF BANKING AND FINANCE RESEARCH (IJBFR )

E-ISSN 2695-1886
P-ISSN 2672-4979
VOL. 3 NO. 1 2017

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Banking Reforms and Credit Creation in the Nigerian Banking Sector: Pre-Reform Era versus Post-Reform Era

Onoh, John Okey (Ph.D) and Eugene Iheanacho (Ph.D)

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Abstract

The Nigerian banking sector before and after the reforms and the credit creation of banks was the central focus of this study. The implications of economic reforms on the economic development of Nigeria motivated this investigation. The study examined how the banking sector performed during and after the reforms, the problems associated with the reforms and its related advantages. The study utilized regression method by using E-views statistical package. The correlation coefficient R2 for each of the periods under consideration showed that most of the variations in the dependent variables were explained in the independent variables after the reforms than before the reforms. The study found out that the 2005 reforms increased credit creation capacity for the banks beyond the years prior to the reforms. Consequent to this the decision was to accept the alternate hypothesis which stated that banks credit creation ability before the 2005 banking reforms was not significantly greater than after the reforms. But given the spiraling growth in inflation, higher unemployment, falling naira and dearth of foreign investments occasioned since 2016 after the period under study the ability for banks to create credit for more economic growth is seriously jeopardized. The study recommended that the monetary authorities in Nigeria should enhance the credit creation capacity of banks by enhancing credit access through the reduction of the prevailing interest rates which would ultimately stimulate the consumer credit to GDP ratio on one hand and consumer spending to GDP ratio on the other hand

keywords:

Banking reforms, profit performance, Nigerian Banking Sector, Pre-Reform and Post-Reform Era

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