Financial Sector Reform had been adopted by the Nigerian Government as a part of their economic reform program. Through this reform program the government intended to liberalize the financial sector and to ease the entry into the banking sector.
Financial Sector Reform in Nigeria had been started with the deregulation of the rates of interest. The financial conditions of Nigeria had been fragile and unstable for more than two decades after independence. Lot of complex restrictions were there on the entry into the banking sector and exchange rates were high.
The fiscal deficits were increasing and so was the rate of inflation. So, the government of Nigeria implemented financial reforms in this country.
Before starting financial liberalization in a large scale the Nigerian government had initiated some programs to restore financial and macroeconomic stability. So, the government made an effort to stabilize the payment balances and restored the proper exchange rates.
The government helped many weak financial organizations to progress and simultaneously, some of the weak institutions were terminated, for they were feeble.
The government introduced indirect monetary instruments and reinforced the prudential bank supervision system. This would help the government to control the financial institutions all over the country. Indirect and market based monetary policy tools had been developed for financial liberalization.
Privatization of the banks owned by the government commenced in 1992. Therefore, government’s intervention into the banks had been stopped which helped the banks to improve their efficiency and management policies.
Impact of Financial Reforms:
Through financial reform the Nigerian government was able to control the inflation rate and also reduce the budget deficit to some extent.
Through financial liberalization, the government increased market competition and improved the asset quality.
The banking system was made efficient and simple and economic stability had been achieved somewhat.
Last Updated on : 26th June 2013