Towards clarifying the powers of the Nigerian banking regulator

Abstract

This thesis examines banking regulation in Nigeria. The thesis has three main objectives; First, to elucidate the role and powers of the Central Bank of Nigeria, (CBN) as the apex regulator for the financial system and within the context of banking failures and crises. Second, to engage in a discourse vis-à-vis the law on banking regulation in Nigeria, with a particular focus on the revocation of banking licenses. Finally, to explore the role of other regulatory bodies which work with the CBN. This thesis provides a historical analysis of banking exchanges from the pre-colonial era to modern times, in order to provide an understanding of how political, local and economic settings as well as theories of regulation have impacted and influenced the development of banking regulation in Nigeria. The thesis concludes that the development of banking regulation has been a consequence of the aforementioned factors. The research examines Nigeria’s historical experiences with banking failures, including the banking crisis of 2008. The thesis finds that the Nigerian regulator has adopted a reactionary strategy instead of a proactive and pragmatic approach to the various crises, which is imperative for an effective banking regulatory regime. Given the outcome of this examination, the thesis makes a case for reform. In addition, the study examines the banking consolidation, a recapitalization exercise implemented by the CBN in 2004. This mandated all banks to achieve a set minimum capital base. It examines the legal issues which surfaced, including the revocation of banking licenses by the CBN, arguably in ‘bad faith’, in order to cogitate the overall potential impact on banking regulation. The research embraces the UK and the US as comparator jurisdictions, so as to distill and critique their responses to the global financial crisis of 2007, against the backdrop of the approach adopted in the Nigerian banking crisis of 2008. It finds that the Nigerian response was the least effective of these jurisdictions and that cogent lessons may be drawn from the comparator jurisdictions. Furthermore, the thesis discusses possible reforms to move forward banking regulation in Nigeria.