Banking Sector Reforms and Financial Intermediation in Nigeria

Abstract

This study examined the effect of banking sector reforms on financial intermediation of commercial banks in Nigeria. Panel data were sourced from Central Bank of Nigeria Statistical Bulletin and financial statement of the commercial banks in the pre consolidation and post consolidation reforms. Multiple regression models were formulated to examined and compare the effect of the pre-consolidation reforms and post consolidation reforms on financial intermediation. Nine commercial banks that bear the same name in the pre and post consolidation reforms were used as sample size. Supply side and demand side financial intermediation were proxies for dependent variables while capital reforms, interest rate reforms, Central bank policy reforms, bank competition, management quality, assets quality, market risk and liquidity reforms were proxies for independent variables. The study employed panel data regression models of pooled effect, fixed effect and random effect models. After cross examination of the models using the Hausman test, the fixed effect models were used. The study found that 97.7 percent variation in demand side financial intermediation of the pre consolidation reforms was explained by variations in banking sector reforms and interest rate reforms and capital reforms have positive but no significant effect, bank competition have negative and significant effect while Central bank reforms have positive but no significant effect on demand side financial intermediation in the pre-consolidation reforms. 67 percent variation in demand side financial intermediation of the post consolidation reform was explained by variation in banking sector reforms and interest rate reforms, central bank reforms and bank competition have positive but no significant effect on the demand side financial intermediation while capital reforms have negative and no significant effect on demand side financial intermediation in the post consolidation reforms. 97.7 percent v