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BANKING REFORMS IN NIGERIA AND ITS IMPLICATION FOR ECONOMIC DEVELOPMENT
A CASE STUDY OF ZENITH BANK PLC

CHAPTER ONE
INTRODUCTION
1.1 Background of the Study
For more than two decades after independence, the Nigerian financial system was repressed, as evidenced by ceilings on interest rates and credit expansion, selective credit policies, high reserve requirements, and restriction on entry into the banking industry. This situation inhibited the functioning of the financial system and especially constrained its ability to mobilize savings and facilitate productive investment.
In Nigeria, we have eighty-nine banks many of which have a capital base of less than US$ 10 million. This section will set out some of the factors that necessitated the need for major banking sector reforms. Through financial intermediation, banks are supposed to facilitate capital formation and promote economic growth by operating in a safe and sound manner. In the past, some financial institutions showed glaring inability to maintain an efficient flow of funds within the economic system. The sharp practices of some Banks together with the unsoundness of others led to a wide spread of financial sector distress and losses to depositors.
It has been seen as a paradox that despite the size of the economy, the country’s reserves are still deposited in foreign Banks due to the low capacity of the local Banks. The sector has been highly concentrated structurally as the ten largest Banks account for about fifty percent of the industry’s total asset and liability. Most Banks in Nigeria have a capital base of less than 10 million Dollars; this has rendered the system very marginal relative to its potentials and in comparison to other countries. There has therefore been the need to be proactive and to strategically place Nigerian Banks to be active players and not spectators in the

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