In Search of Financial Stability in Nigeria: From Legislation to Effective Regulation of Banks

Abstract

The systemic importance of banks in any economy brings to the fore the inevitability of exploring ways of keeping banks not only strong but also within the safety level desired by depositors and financial managers. This is underscored by the invaluable and fundamental roles of these financial institutions in the maintenance of financial stability. The state of banking regulation in Nigeria, especially before the introduction of reforms in the sector, had given serious cause for concern. This observation is in light of serious illiquidity and systemic distress that was synonymous with the banking sector in Nigeria in the 1990s and even into the opening years of the twenty-first century. This article examines in detail the legal and institutional frameworks for banking regulation in Nigeria. It finds that the challenge of ineffective regulation of the banks in the country may not necessarily be associated with the dearth or non-comprehensiveness of statutes on the subject but rather borders on uncoordinated and ineffective enforcement mechanisms, coupled with policy inconsistency on the part of banking regulators. This situation engenders confusion, uncertainty and instability because prospective investors tend to be more hesitant, depositors shy away from saving with banks and banks tend to have to grapple with persistent illiquidity when the system is unpredictable. The article therefore advocates a policy shift from legislative review to effective enforcement of the existing laws regulating banks in Nigeria in order to grow these financial institutions into transparent, efficient, strong and globally competitive institutions.

Analysis of the Impact of Digital Currency on Traditional Banking and Financial Stability

“…Vives [6] studied the influence of digital currency on financial stability, and pointed out that the volatility of digital currency market had a certain threat to financial stability. Ojukwu-Ogba [7] discusses the influence of digital currency on the global financial system, and thinks that the growth of digital currency will increase the fragility and uncertainty of the financial system. Belguith et al [8] applied SVM algorithm to the evaluation of financial wind direction, and found that this algorithm can effectively identify the risks of financial markets and give pre-alarm.…”