The Role of Financial Regulations in Enhancing Banking Sector Stability in Nigeria: A Case Study of CBN’s Regulatory Framework
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Background of the Study
The stability of the banking sector is a critical component of economic growth, as it ensures the efficient allocation of resources and the protection of depositors’ funds. In Nigeria, the Central Bank of Nigeria (CBN) has implemented a range of regulatory frameworks to enhance banking sector stability, including capital adequacy requirements, risk management guidelines, and anti-money laundering measures (Bello & Chukwu, 2023).
Despite these efforts, challenges such as non-performing loans, fraud, and inadequate corporate governance persist, highlighting the need for continuous evaluation of the regulatory framework’s effectiveness. This study focuses on the role of CBN’s regulations in promoting stability in the Nigerian banking sector.
Statement of the Problem
The Nigerian banking sector has experienced periods of instability, including the 2009 banking crisis, which was attributed to poor regulatory oversight and weak risk management practices. Although the CBN has since introduced stricter regulations, issues such as compliance gaps and emerging risks, including digital fraud, continue to threaten stability (Adeleke & Yusuf, 2024).
This study examines the impact of CBN’s regulatory framework on enhancing stability and identifies areas requiring improvement.
Objectives of the Study
- To analyze the effectiveness of CBN’s regulatory framework in enhancing banking sector stability.
- To assess the challenges faced by Nigerian banks in complying with CBN regulations.
- To recommend strategies for improving the regulatory framework for banking sector stability.
Research Questions
- How effective is the CBN’s regulatory framework in enhancing banking sector stability?
- What challenges do Nigerian banks face in complying with CBN regulations?
- What strategies can improve the regulatory framework for banking sector stability?
Research Hypotheses
- CBN’s regulatory framework significantly enhances banking sector stability.
- Compliance challenges negatively affect the effectiveness of the regulatory framework.
- Improved regulatory measures will lead to increased banking sector stability.
Scope and Limitations of the Study
The study focuses on CBN’s regulatory framework and its impact on Nigerian banks between 2023 and 2025. Limitations include restricted access to internal bank compliance reports and the potential influence of global economic conditions.
Definitions of Terms
- Regulatory Framework: A set of rules and guidelines established to govern the banking sector.
- Banking Sector Stability: The ability of the banking sector to function effectively without systemic disruptions.
- Compliance Challenges: Difficulties faced by institutions in adhering to regulatory requirements.
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