Regulatory Intervention Effectiveness and Performance of Financial Institutions in Nigeria.

Abstract

Deposit Money Banks have over the years made good contributions to Nigeria’s economic development. However much remains to be done as various regulatory interventions implemented to ensure safe and sound financial services delivery have not achieved the expected results as Nigerian banks still carry poor credit portfolios, illiquidity, weak asset quality, and high interest rates and this may be attributed to sub-optimal increase in asset base, increasing loan loss provision, huge non-performing loan, poor earnings of non-interest income and return on assets. This study adopted ex-post facto design using multiple regressions estimation techniques to analyse the data which was extracted from annual financial statements of three (3) foremost DMBs in Nigeria (UBA, FBN and GTB). The study revealed that combined variations in the institutions intervention effectiveness (shareholders fund, reserve requirements, statutory reserve, asset quality and prime lending rate) have resulted into 60% changes in all the explanatory variables of bank performance. It is therefore recommended that the CBN should be more proactive in the exercise of their regulatory intervention functions when an indication emerges that any of the banks’ are experiencing liquidity crisis to avoid systemic distress in the banking industry as intermediation of funds can get disrupted and liquidity challenges turn into reputational damage.