Corporate Governance in the Nigerian Banking Sector: A Bounded Rationality Conundrum

Abstract

The consequences of the global financial crisis of 2007 emphasised the centrality of the banking system to not only economic sustainability, but also the contributions of a robust corporate governance mechanism to the establishment of an efficient banking system. This development provoked a reaction by policy makers across varieties of capitalism including Nigeria. As Africa’s largest economy, Nigeria embarked on a recapitalisation and consolidation exercise in its banking industry following reported widespread structural and operational deficiencies. Despite this intervention, the sector continues to experience a variety of challenges, much of which relates to weaknesses in its poor corporate governance. Whereas the extant literature has examined these problems, this chapter seeks to broaden the literature by exploring corporate governance in the Nigerian banking system from a bounded rationality concept perspective. In doing this, this chapter undertakes a review of corporate governance in the Nigerian banking system, examines the rationality concerns influencing corporate governance practices amongst Nigerian banks, and shows that attempts at addressing corporate governance issues must acknowledge that corporate governance is an information-based mechanism.