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An Assessment of the Stability and Diversity of the Nigerian Financial Service Sector

Opeyemi Oluwole Adegboro, Samuel Orekoya and Wasiu Adekunle

MPRA Paper from University Library of Munich, Germany

Abstract: In recent times, policy makers have considered the financial sector as a vital factor for growth and development in a country. So many research efforts to address the resilience and well-being of the financial system have stressed the importance of diversity in the financial system. This study assesses the stability and diversity of the financial service sector in Nigeria. The study employed the use of data from Nigeria’s commercial banks’ financial report and the Central Bank of Nigeria (CBN) statistical bulletin for the period of 13years (2005:Q1 – 2017:Q4). The study adopted the Auto Regressive Distributed Lag Estimation technique to determine the long run and short run dynamics of the variable employed and the Hirshman Herfindahl Concentration Index for financial stability and diversity respectively. These analyses provided several findings such as a negative relationship between stability and total bank asset as a result of weak corporate governance among the regulatory bodies, a positive relationship between stability and loan asset, a positive insignificant relationship between stability and Real Gross Domestic Product due to poor level of financial coverage among the entire populace and finally the analysis reveals a fairly diversified financial system. The study recommends a strict supervisory and monitoring framework from both the Asset Management Company of Nigeria (AMCON) and the Central Bank of Nigeria (CBN) in the acquisition of the asset from the commercial banks. More so, the monetary authority should direct the commercial banks to give out loans with moderate interest rate and also control the inflationary pressures that might be posed as a result of the low interest rate through other instruments and finally in order to improve diversity in the financial system, the financial institutions particularly the commercial bank should fully inculcate the global idea of financial technology to deliver better financial service through technology solutions and also keep itself abreast of the pace of development in foreign countries financial service sector as this will gear them towards delivering better and innovative service to Nigerians.

Keywords: Financial Stability; Financial Diversity; Z Score Total Bank Asset and Loan Asset (search for similar items in EconPapers)
JEL-codes: G1 G14 G17 G21 G28 (search for similar items in EconPapers)
Date: 2019-11-13
New Economics Papers: this item is included in nep-cfn and nep-fdg
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