An Evaluation of the Effectiveness of Central Bank of Nigeria (CBN) Audits in Maintaining Financial Stability: A Study of Nigerian Banks
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Background of the Study
The Central Bank of Nigeria (CBN) plays a pivotal role in regulating the financial sector to ensure stability, transparency, and public confidence. CBN audits are designed to evaluate the financial health of banks, assess risk management practices, and enforce compliance with monetary policies. These audits are critical in maintaining financial stability, particularly in a volatile economic environment characterized by inflation, currency fluctuations, and systemic risks (CBN, 2024).
Nigerian banks are subject to regular CBN audits to ensure adherence to capital adequacy requirements, liquidity ratios, and governance standards. This study evaluates the effectiveness of these audits in maintaining financial stability and mitigating systemic risks in the banking sector.
Statement of the Problem
Despite the critical role of CBN audits, challenges such as limited enforcement, inconsistencies in audit practices, and resistance from financial institutions undermine their effectiveness. Inadequate monitoring has led to issues such as insider abuse, poor governance, and financial instability.
This study investigates the effectiveness of CBN audits in maintaining financial stability in Nigerian banks, identifying areas for improvement and recommending strategies for enhancing audit practices.
Objectives of the Study
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To evaluate the impact of CBN audits on maintaining financial stability in Nigerian banks.
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To identify challenges affecting the effectiveness of CBN audits.
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To recommend strategies for improving the effectiveness of CBN audits in ensuring financial stability.
Research Questions
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How do CBN audits contribute to maintaining financial stability in Nigerian banks?
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What challenges affect the effectiveness of CBN audits?
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What strategies can improve the effectiveness of CBN audits in ensuring financial stability?
Research Hypotheses
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H₁: CBN audits significantly contribute to maintaining financial stability in Nigerian banks.
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H₂: Challenges such as inadequate enforcement reduce the effectiveness of CBN audits.
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H₃: Enhanced CBN audit practices improve financial stability in Nigeria's banking sector.
Scope and Limitations of the Study
The study focuses on Nigerian banks, evaluating the impact of CBN audits on financial stability between 2023 and 2025. Limitations include restricted access to internal audit reports and evolving regulatory frameworks.
Definitions of Terms
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CBN Audits: Audits conducted by the Central Bank of Nigeria to evaluate financial institutions' compliance with regulatory standards.
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Financial Stability: The resilience of the financial system to withstand economic shocks and maintain public confidence.
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Nigerian Banks: Financial institutions operating within Nigeria, regulated by the CBN.
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