Banking regulation in an era of structural adjustment: The case of Nigeria

Abstract

Prior to the 1986 adoption of the Structural Adjustment Programme (SAP) in Nigeria, the government was the main player both in the practice and regulation of banking in the country. At the time, this arrangement was expedient given the government objective of preventing the domination of a very important sector of its economy by foreigners. Under this pre‐SAP dispensation, however, the government role as both owner of many of the large banks and regulator of the banking industry sometimes brought the government into conflict with itself. The adoption of SAP, which has led to government divestment of its shares in most banks, has now extensively altered the relationship between banks and the government (regulators). The aim of this paper is to help better understand the various forces that impact on the regulatory process for banks in Nigeria. It will also suggest ways of making regulation more effective in an era of structural adjustment.