CONCLUSIONES DEL MARCO REFERENCIAL

The move towards a liberalised financial system was induced by reforms embodied in the IMF-inspired Structural Adjustment Programme (SAP) of 1986. The main objectives of the SAP were to drastically restructure and diversify the productive

economy, privatise public enterprises, as well as the attainment of external balance (CBN, 2000). These reforms brought about the loosening of credit allocation quotas and the deregulation of interest rates. The multi-structured foreign exchange market that was in operation at the time also presented numerous arbitrage and profit opportunities for banks which greatly affected normal financial intermediation. This resulted in a huge entry of new banks from the late 1980s specialising in foreign exchange operations that took advantage of price wedges.

Although, banks grew numerically during this period and the financial sector blossomed, yet financial intermediation as measured by private sector credit and deposits, reduced (Bello, 2005). Thus, the removal of controls (as in financial liberalisation) did not guarantee the efficiency of financial intermediation. During this period, commercial banks were operating at the retail end of the market where small to medium savings were mobilised and disbursed in the form of loans and advances while merchant banks on the other hand were essentially wholesale banks providing such services as deposit taking and acceptances, investment advice, bills discounting to equipment leasing among other activities.

Nigerian banks have grown appreciably in number and branch network. However, commercial banks have experienced more growth compared to their merchant counterparts. While the number of commercial banks in 1980 stood at 20 (with 740 branches), merchant banks that were in operation were 6 (with 12 branches). By 1986, the number of commercial banks stood at 29 (with 1367 branches) compared to 12 merchant banks (with 27 branches) - See Table 3.4. The effect of the 1986 liberalization reflected in the increase in the number of commercial banks to 65 in 1994 with 2,403 branches, though this number fell to 54 banks and 2,234 branches in 2000, following the re-tightening of regulation including an increase of mandatory minimum capital requirement and liquidation of ailing banks by the Nigerian Deposit Insurance Corporation (NDIC) (Enendu, et al., 2013).

Table 3.4: Growth in Number of Banks and Bank Branches (1980-2013) Year No of Banks in Operation No of Bank Branches

Commercial Banks Merchant Banks Total Commercial Banks Merchant Banks Total 1980 20 6 26 740 12 752 1981 20 6 26 869 15 884 1982 22 8 30 991 19 1010 1983 25 10 35 1,108 24 1,132

1984 27 11 38 1,249 25 1,274 1985 28 12 40 1,297 26 1,323 1986 29 12 41 1,367 27 1,394 1987 34 16 50 1,483 33 1,516 1988 42 24 66 1,665 46 1,711 1989 47 24 81 1,885 54 1,939 1990 58 48 106 1,937 74 2,011 1991 65 54 119 2,023 84 2,107 1992 66 54 120 2,275 116 2,391 1993 66 54 120 2,258 124 2,382 1994 65 51 116 2,403 144 2,547 1995 64 51 115 2,368 144 2,512 1996 64 51 115 2,407 147 2,554 1997 64 51 155 2,330 147 2,477 1998 51 38 89 2,107 113 2,220 1999 57 33 90 2,234 110 2,344 2000 54 36 90 2,234 194 2,428 2001 90 - 90 3,247 - 3,247 2002 90 - 90 3,247 - 3,247 2003 89 - 89 3,010 - 3,010 2004 89 - 89 3,492 - 3,492 2005 25 - 25 2,815 - 2,815 2006 25 - 25 3,245 - 3,245 2007 24 - 24 4,296 - 4,296 2008 24 - 24 4,952 - 4,952 2009 24 - 24 5,436 - 5,436 2010 24 - 24 5,809 - 5,809 2011 24 - 24 5,454 - 5,454 2012 21 - 21 5,564 - 5,564 2013 24 - 24 5,639 - 5,639

Source: CBN Statistical Bulletin (various years)

This dual banking structure however, placed some limitations on the scope and scale of efficient intermediation. Thus, with the introduction of the universal banking system in 2001, commercial banks now engaged in other aspects of business where large amount of funds are intermediated especially in syndication of loans and other activities that are typically within the purview of corporate finance and investment banking. The emergence of universal banks in 2001 broke the dichotomy between merchant and commercial banking (Aderibigbe, 2004), bringing the total number of

banks to 90 with 3,247 branches. The number of banks dropped slightly to 89 as at 2004.

The banking consolidation of 2004/05 in Nigeria, which led to the recapitalisation of existing banks and the acquisition of smaller banks by larger banks produced stronger and bigger banks, reducing the number drastically from 89 to 25 as at 2006 and to 24 following the merger of two of the 25 banks in 2007. Bello (2005) points out that the elimination of weaker banks and the institution of well capitalised banks should create opportunities for greater diversification and financial intermediation. Although the number of banks dropped during this reform period, there was an increase in total branch network to 4,296 as at 2007.

Following the global economic crisis of 2008–09, the Nigerian financial sector experienced further consolidation and growth after further reforms were introduced, bringing the total number of banks to 21 and 5,564 branches in 2012. The Nigerian banking sector grew at an annual average rate of 18.6% during 2010–13 and has become West Africa’s largest banking market (Oh, 2017). Financial reforms have produced a financial landscape characterized by improved financial infrastructure, large and strong banks and an efficient payments system. Nigeria-based banks such as United Bank for Africa, Zenith Bank and Guaranty Trust Bank among others, have a strong presence across the African continent.

In the process of carrying out intermediation function over the years, Nigerian banks have built up enormous amount of assets base. The growth in the total asset of the banks has showed an exponential trend over the past three decades. From N82.95 billion in 1990, the total assets of the banks grew by over 70 per cent to N694.6 billion at end-December 1998, and rose substantially to N10,106.4 billion in 2007, representing a growth of 1,354.9 per cent between 1998 and 2007 (see figure 3.4). Following the relative stability in the sector the total asset grew by 71.5 per cent between 2007 and 2010 to reach N17,522.9 billion at end-December 2010. As at December 2013, total banking assets stood at N24, 301.20 billion.

Source: CBN Statistical Bulletin (various years)

Several factors accounted for the growth of bank assets in Nigeria, such as the growth of the economyfuelled by oil revenues, the rise in the demand for banking services and the liberalization of entry conditions under SAP.