(AERC, 2001-11-01) Sylvanus I. Ikhide; Abayomi A. Alawode
Financial sector reforms began in Nigeria with the deregulation of interest rates in August
1987. Since then, far-reaching policy measures including the chartering of new banks,
reform of the capital market and a move from direct to indirect monetary controls have
been undertaken. The results from the implementation of the reforms have been
disappointing, however. Bank insolvency, high inflation and excessively high interest
rates have become common phenomena in the economy. This study uses discriminant
analysis to demonstrate that the health of banks deteriorated following reforms in Nigeria.
The study cautiously identifies a wrong sequencing process as a major factor in the poor
performance of the financial sector reforms, but agrees that a lot more research needs to
be done in this area.