Bank distress, consolidation and economic development in Nigeria

Abstract

The role of the banking sector in the economic development of any country cannot be over emphasized. Inter alia, the vicious circle of poverty thesis posits that low savings, low investment and capital deficiency constitute the principal causes of underdevelopment in the Third World. Unfortunately, the banking sector has remained unstable in both pre and post independence Nigeria, with several episodes of devastating distresses. This paper takes an overview of the phenomenon of bank distress coupled with its attendant causes as well as the recent banking consolidation initiative spear-headed by the Central Bank of Nigeria. The paper further examined the implications of these events for Nigeria‟s economic development with the hope that the outcome will further prod and nudge the monetary authorities in ensuring a sound, expanding and enduring banking system in Nigeria.

Keywords: Bank; distress; consolidation; economic development