INSTITUTIONAL WEAKNESSES, POLITICAL INTERFERENCE, AND REGULATORY EFFECTIVENESS IN NIGERIAN BANKING SUPERVISION

Abstract

The Central Bank of Nigeria (CBN) is the main agency charged with the supervision and monitoring of banks and other related financial institutions in Nigeria. Despite the existence of several institutional frameworks, the Nigerian banking sector was affected by monumental challenges which almost eroded consumers’ confidence in the sector. It is in this regard that the article examined the institutional weaknesses, political interference, and regulatory effectiveness in Nigerian banking supervision using the secondary methods of data analysis. Findings from the study showed that there is the existence of regulatory capture in the Nigerian banking sector; further findings showed that regulatory capture is commonly caused by the concentration or centralization of regulatory and supervisory oversight on a single regulatory agency; also, it was observed in the study that the liberalization of the Nigerian banking sector contributed in no small measures to financial instability of the banking sector in Nigeria, and so on. Several recommendations were proposed in the article, such as the appointment of the position of central bank governors should be depoliticized and should not be based on quota system, rather, professional associations, such as the Chartered Institute of Bankers of Nigeria and Institute of Chartered Accountants of Nigeria, and other relevant bodies should be assigned the responsibility of nominating three names of candidates for the position of CBN governor to the president, who would in turn upon his consideration forward such names to the legislature for confirmation after prior investigation about the ethical fitness of such candidates by the Department of State Services (DSS) among others.