EVALUATING THE OUTCOMES OF THE 2005 NIGERIAN BANKING REFORMS ON DEPOSITS, PROFITS, AND CREDIT CREATION

Abstract

This study investigates the effects of the 2005 banking reforms on deposits, profits, and credit creation in Nigerian banks within a post-consolidation era. The 2005 reforms, introduced by the Central Bank of Nigeria (CBN), significantly increased the minimum paid-up capital requirement for banks from N2 billion (US$14 million) to N25 billion (US$173 million), reducing the number of banks from 89 to 25. This major recapitalization aimed to strengthen the quality of banks, ensure financial stability, and enhance the sector’s contribution to the real economy. By examining selected banks, the study assesses how these reforms influenced key performance indicators such as deposit mobilization, profitability, and credit creation. Findings indicate that post-consolidation banks experienced improved capital adequacy, which positively affected their capacity to attract deposits, expand credit, and increase profitability. The study underscores the importance of regulatory reforms in shaping bank performance and sustaining a stable financial sector, providing insights for policymakers, banking practitioners, and stakeholders in emerging economies