EFFECTS AND CAUSES OF BANK FAILURE IN NIGERIA

One of the major issues arising in the recent times, for both management and practitioners, relates to the principles which determine bank successes and failures i.e. why some organizations grow and others fail. Many nations have experienced failures especially in their banking sectors, and this has caused great harm to their economies. The Nigerian banking system has also experienced series of failures in spite of the Nigerian Banking Ordinance promulgated in 1952. The period between 1994 and 2003 was characterized by a great surge of banking distress which had a great impact on the economy. The main objective of this study is to make a critical analysis of the concept of bank failure in Nigerian banks, identify the most significant reasons for the series of bank failures, analyze the effects of these crises on the Nigerian economy and make policy recommendations on how to prevent future crises. Findings indicate that there are common factors that lead to failure in banks and there are also factors which are country specific. Based on these findings, stakeholders and investors can have a clearer view of the causes of the recurrent bank failures in Nigeria and the impact on the Nigerian economy.