Underdeveloping Nigeria Through Reregulation: Will Community Banks Survive?

In this paper, the author argues that the implications of the new monetary policy in Nigeria can be summed up as an under-developing Nigeria through re-regulations. He also wonders whether community banks will escape the fetters of financial repression.

The paper states that:

• The financial system of Nigeria, which was characterized by tight regulation by the government, became de-regulated in 1986;
• De-regulation led to an increase in domestic resource mobilization and an expansion in the financial infrastructure;
• However, failure in its implementation led to an increase in public debt, inflation, political and economic instability;
• In 1994, the government resorted to re-regulation and tightened controls on all operations.

The paper examines re-regulation and states that:

• Its results were disastrous and led to a loss of confidence in the economy and policymakers;
• The Central Bank is now thought of as an instrument of the government.

The paper examines community banks in Nigeria, and states that:

• They are local financial institutions owned by self-help groups and individuals;
• They have been excluded from tight controls;
• Have been attracting customers, who have lost confidence in their commercial bank;
• Their main purpose is to provide safe savings and credit facilities to the local population.

The paper goes on to provide the details of the operations and history of community banks. It concludes with a case study of a particular community bank.