BANK FAILURES/DISTRESS AND THE NIGERIAN ECONOMY

In any economic system, the financial and particularly the banking industry occupy a unique position. This uniqueness arises from the financial sector’s strategic roles in the process of development and its vulnerability to crises and collapses. Following the introduction of the Structural Adjustment Programme (SAP) in Nigeria in 1986, and the subsequent deregulation of the financial sector in 1987, there was a phenomenal increase in the number of financial institution. Also the banking sector, during this time, was inundated with adverse economic forces, the resultant effect being the emergence of distress in the banking industry, a phenomenon that has seriously affected the growth and development of the economy. This outcome is expected since the problem and failures and distress have significantly hampered the ability of these financial institutions to provide the necessary funds for such growth and development. Bank failure or distress as it were, is not peculiar to Nigeria. It occurs in other economies of the world, although the magnitude of distress and its impact varies from one country to another.