EFFICIENCY OF DEPOSIT MONEY BANKS AND BANKING REFORMS IN NIGERIA

Abstract

This paper examines the effect of the 2005 and 2009 banking reforms on the efficiency of Nigerian deposit money banks. The study also sought to examine the extent to which the global financial crisis (GFC), the bridge banking resolution technique and the bailout strategy affected Nigerian DMBs. The DEA window analysis technique is employed to determine the efficiency of DMBs within the period of 2000 – 2013. The data used in this study was obtained from the Bureau Van Dijk Bankscope Database. Average aggregate efficiency scores peaked at 89.83% in relation to the 2005 banking reforms but plummeted to 82.92% in reaction to the global financial crisis. However, the aggregate average efficiency levels improved to 85.26% after the adoption of the bridge banking technique. The results indicate that efficiency scores reacted positively to the 2005 and 2009 banking reforms and responded negatively to the episode of the global financial crisis. The study also found that the bailout strategy was not effective in resolving troubled banks, while the bridge banking technique was successful in preventing bank failures. Conclusively, this study holds that banking efficiency improves after a year or two of capital injections. This study therefore recommends that continuous efficiency of banks should not be dependent on the amount of capital requirement or capital injected but on the judicious utilisation of bank assets and the proper management of liability.