Regulatory framework and bank operations in Nigeria: A VECM approach

Abstract

This study investigated the effect of regulatory framework on banking operations in Nigeria, 1981-2018. It adopted the vector error  correction procedures. Prominent among the findings is that a significant relationship exists between Nigeria's regulatory framework and banking operations but only in the short-run analysis. From the findings, regulatory framework exerts a significant effect on  commercial bank operation in Nigeria within the study period, 1981-2018. Also, revealed is that most of the included explanatory  variables bore the expected signs, while only two out of the five explanatory variables were statistically significant. Thus, the study therefore concluded that there is the existence of possible poor regulatory/supervisory role by the Central Bank of Nigeria. Hence, there is an urgent need for the CBN to pay more attention to the use of these regulatory instruments in controlling the banking system and hence maintain sanity in the banking industry in Nigeria.

Keywords: Regulatory framework, Banking operations, Vector Error Correction Approach