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There is a growing concern associated with the recent banking sector reform on whether it achieved its purpose of making banks efficient or not. Several studies have had several opinions with respect to the real impacts of banking sector reforms on banking sector efficiency. Consequently, this study examines the impact of Nigerian banking sector reforms on Nigerian banks’ performance and efficiency in two time periods – pre -consolidation period and post consolidation period. the essence of this study is to affirm whether the reforms have had any meaningful impact on the performance of the banking industry in Nigeria, which most of the previous studies failed to account for and considered such variables such as commercial bank Credit to Private Sector (CPS),Number of banks(NB), Bank Asset(BA), Non-Performing Loan To Total Loans(NPLTTL) and Liquidity Ratio(LR).






Title page

Approval page




Table of content



1.1        Background of the study

1.2        Statement of problem

1.3        Objective of the study

1.4        Research Hypotheses

1.5        Significance of the study

1.6        Scope and limitation of the study

1.7       Definition of terms

1.8       Organization of the study




3.0        Research methodology

3.1    sources of data collection

3.3        Population of the study

3.4        Sampling and sampling distribution

3.5        Validation of research instrument

3.6        Method of data analysis



4.1 Introductions

4.2 Data analysis


5.1 Introduction

5.2 Summary

5.3 Conclusion

5.4 Recommendation













  • Background of the study

Banking reforms have been an ongoing phenomenon around the world for a very long time, but it is more intensified in recent time because of the impact of globalization which is precipitated by continuous integration of the world market economies. Banking reforms involved several elements that are unique to the country based on historical, economical and institution al imperatives, reforms result from a need for re-orientation, repositioning and revitalizing an existing status also bedecked with bottlenecks that inhibits institutional smooth running and growth. The dynamic nature and uncertainties in human endeavors’ calls for innovations. In Nigeria, the ability of the financial sub sectors to play its role has been periodically punctuated by its vulnerability to systematic distress and macroeconomic vitality and policy fine tuning inevitability ( kama S. 2012) Banking reforms are aimed at addressing weak corporate governance risks management, operational efficiency, under capitalization and to meet with issuing requirement of the economy and the standard of the global world (Uchenta 2005). The recent reforms in the banking industry in the last three years have a number of measures and initiates taken by the central bank of Nigeria to promote the safety, stability and soundness of the sectors, although these measures have impacted negative ely on some stakeholders and banks workers, industry watchers strong believes that the benefit of the measures outweigh the negative effects. The Nigeria banking sectors since its inception in 2nd August, 1891 has evolved in several stages. The first was a free banking era characterized by unregulated and laissez-faire banking practices and hence massive bank failure (onyeakagbel 1997). The next stage was an era of supervision, examination and control of banks in Nigeria which started with the banking ordinance of 1952. Thus, this stage bordered on definition of banking business, prescription of minimum requirement for the expatriate and indigenous banks, maintenance of a reserved funds, adequate liquidity and inculcation of examination and control habit into the banking sectors. The period lasted till 1959.The second stage under the reforms started from 1959-1986. It was during the period that the CBN commercial operation. The central bank of Nigeria took off on July 29, 1958 with Mr. R.P Fenton of the Bank of England as the first Governor which was also an era of control and indigenization (Godwin chigozie 2010). The third stage commence from 1956-1993,the reform era was a component of the structural adjustment programme (SAP) which kicked off during the President Babangida regime. The major reforms policy in this era were deregulation of interest rate, exchange rate and free entry or exit into the banking sectors. Other reforms include the guided deregulation (1994-1998), universal banking era (1994- 2003); consolidated era (2004-2008) and past consolidated era( 2009-2012). The mother of all the reforms came up on July 2004, when 89 banks were forced to merge culminating in 25 universal banks. There was a further reduced to 24 banks through merger and acquisition carried out in the period. Therefore, the primary objective of the reform is to guarantee an efficient and sound financial system. The reforms are designed to enable the banking system develop the required resilience to support the economic development of the nation by efficiently performing its function as the fulcrum of financial intermediation (Lemo2005). Nigerian banking industry in 2004 was generally described as fragmented into relatively small, weakly capitalized banks with most banks having paid up capital of US$10 million or less. The best capitalized bank had capital of US$240 million as compared to a small developing economy like Malaysia where the least capitalized bank had capital of US$526 million within the same period. Ebong (2006) described the system as exhibiting other features like high non-performing loans, insolvency and illiquidity, low capital base, over dependence on public sector deposits, poor asset quality, weak corporate governance, a system with low depositors’ confidence and a banking sector that could not support the real sector of the economy at 25% of GDP compared to African average of 78% and 272% for developed countries. As stated by Soludo (2004) ―the system faces enormous challenges which, if not addressed urgently, could snowball into a crisis in the near future‖. To address these issues and to reposition the banking system, the monetary authority came up with a 13-point reform agenda centered on consolidation and recapitalization. Available evidence shows that there has been a consistent increase in the number of failed banks despite the various reforms undertaken since 1987. This is further substantiated by Sanusi (2010) in his assertion that despite the consolidation, when in mid-2008 the global financial and economic crisis set in, the banking system witnessed the re-emergence of an extremely fragile financial system similar to pre-consolidation era. However, eight banks were adjudged insolvent and received a total sum of N620 billion (approximately US$4.1 billion) from the CBN in conjunction with NDIC and the Federal Ministry of Finance (MOF). This amount represents 2.5% of Nigeria’s entire 2010 GDP of US $167 billion (Alford, 2012). However, Ogujiuba and Obiechina (2011) noted that eight interdependent factors are believed to have led to the creation of an extremely fragile financial system that was tipped into crisis by the global financial crisis. These factors include; macroeconomic instability caused by large and sudden capital inflows; major failures in corporate governance of banks; lack of investor and consumer protection; inadequate disclosure and transparency about the financial position of banks; critical gaps in regulatory framework and regulations; uneven supervision and enforcement; unstructured governance and management process at the CBN; and weaknesses in the business environment in the country. In order to respond to the above-listed problems, the Central Bank of Nigeria (CBN) unveiled a ten-year reform blue print anchored on four cardinal reform programmes for the stabilization of the banking sector and the finance sector in general. The four cardinal programmes for the sector’s transformation involve enhancing the quality of banks; establishing financial stability; enabling healthy financial sector evolution and ensuring that financial sector contributes to the real economy.


A critical look at the nation banking sector invariably portend the need for urgent attention as situation that have made for series of reform of the sector over the years. The reform started when it became clear that poor corporate governance practice, over and undue exposure to the capital market, oil and gas sector, poor risk management practices, inadequate disclosure and transparency about the banks financial position characterized the Nigerian banking sector (Wilson 2006). The CBN in June 2009 took a-three pronged approach to assess the financial conditions of the 24banks. One of the approaches was a special audit jointly carried out by the CBN and the Nigerian Deposit Insurance Corporation. The exercise highlighted inadequacies in capital asset and liquidity ratios as well as weaknesses in corporate governance and risk management in nine banks. These banks were found to be in distress as they failed to meet the minimum 10% capital adequacy and 25% minimum liquidity ratio. Apart from accumulating high non-performing loans, these banks were seriously exposed to the oil and gas sector as well as the capital market poor risk management practices in the form of absence of necessary control measures were prevalent as the boards and management of the banks had failed to observe established control (Ademola Alawiye 2012). A holistic investigation into what went wrong in Nigeria leading up to the banking crisis in 2009 found eight (8) highlighted and interrelated factors responsible. These are; macro economic instability caused by large and sudden capital inflows, major failures in corporate governance of banks, lack of investors and consumer sophistication, inadequate disclosure and transparency about the financial position of banks, critical gaps in the regulatory framework and un-regulatory, uneven supervision and reinforcement, unstructured governance and management processes at the CBN and weakness in the business environment (Sanusi Lamido 2012). Due to the increase in the number of banks which overstretched the existing human resources capacity of banks thereby resulting into many problems such as poor credit appraisal system, financial crime, accumulation of poor asset quality and so on. The banking sector is characterized by general small-sized fringed banks with high overhead cost, low capital base average less than $10million or N1.4billion in 2005, heavy reliance on government patronage(with 20% of industry deposits from government sources) boardroom squabbles, dwindling earning and in some cases loss making. This has necessitated the need for the study.


The main objective of the study is to investigate if the efficacy of the recent bank reforms in facilitating profitability and efficiency in deposit money banks, but to aid the completion of the study, the researcher intends to achieve the following specific objective;

  1. To examine the impact of bank reforms on the profitability of Nigerian banks
  2. To examine the role of bank reforms on service efficiency by banks
  • To examine if there is any significant relationship between bank reforms and profitability
  1. To ascertain the impact of bank reforms on banks operation in Nigeria

The following research hypotheses were formulated by the researcher to aid the completion of the study;

H0there is no significant relationship between bank reforms and profitability

H1there is a significant relationship between bank reforms and profitability

H0bank reforms do not play any role in ensuring service efficiency by banks

H0bank reforms do play a role in ensuring service efficiency by banks


It is believed that at the completion of the study, the findings will be of great importance to the management of deposit money banks in Nigeria as the study will help the management of this banks in formulation and implementation of policies that is in line with the reforms to enhanced effective service delivery and profitability in the banks, the study will also be of importance to the central bank of Nigeria as the study seek to explore the merit of adherence with the stipulated reforms by the deposit money banks and other financial institutions. The study will also be of importance to researchers who intend to embark on a similar study as the study will serve as a pathfinder to further study. Finally, the study will be of great importance to students, lecturers, academia’s, researchers and the general public as the study will contribute to the pool of existing literature and add to knowledge.


The scope of the study covers bank reforms as a means of improving profitability and efficiency in banking sector in Nigeria, but in the cause of the study, there were some factors that limited the scope of the study;

  1. a) AVAILABILITY OF RESEARCH MATERIAL: The research material available to the researcher is insufficient, thereby limiting the study
  2. b) TIME: The time frame allocated to the study does not enhance wider coverage as the researcher has to combine other academic activities and examinations with the study.
  3. c) Organizational privacy: Limited Access to the selected banks makes it difficult to get all the necessary and required information concerning the activities.




A bank is a financial institution that accepts deposits from the public and creates credit. Lending activities can be performed either directly or indirectly through capital markets. Due to their importance in the financial stability of a country, banks are highly regulated in most countries

Bank reforms

The Financial Services (Banking Reform) Act of 2013 is a UK Government proposal aiming to impose higher standards of conduct on the UK’s banks. It also looks to improve their loss-absorbing capacity and outlines plans for the “ring-fencing” of retail and wholesale banking activities.


Profit, in accounting, is an income distributed to the owner in a profitable market production process. Profit is a measure of profitability which is the owner’s major interest in income formation process of market production. There are several profit measures in common use.


This research work is organized in five chapters, for easy understanding, as follows

Chapter one is concern with the introduction, which consist of the (overview, of the study), historical background, statement of problem, objectives of the study, research hypotheses, significance of the study, scope and limitation of the study, definition of terms and historical background of the study. Chapter two highlights the theoretical framework on which the study is based, thus the review of related literature. Chapter three deals on the research design and methodology adopted in the study. Chapter four concentrate on the data collection and analysis and presentation of finding.  Chapter five gives summary, conclusion, and recommendations made of the study.


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