THE ROLE OF COMMERCIAL BANKS IN THE ECONOMIC DEVELOPMENT OF RURAL AREAS OF NIGERIA

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Economy Transdisciplinarity Cognition www.ugb.ro/etc Vol. 15,
Issue 1/2012

103-111

The Role of Banks in Capital Formation and Economic Growth: The Case of
Nigeria
Alex Ehimare OMANKHANLEN
Covenant University, Ota, Ogun State, NIGERIA alexehimare@yahoo.com Abstract: This study investigates the role of banks in capital formation and economic growth:
The case of Nigeria for the period 1980-2009. The economies of all market-oriented nations depend on the efficient operation of complex and delicately balanced systems of money and credit. Banks are an indispensable element in these systems. This study employed the
Ordinary Least square method in carrying out the research. The explanatory variables employed include Commercial Banks Deposit
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Another major problem banks have had to content with is the inconsistency in monetary and regulatory policies. The surveillance and regulatory measures of the Central Bank of Nigeria (CBN) have unfortunately been unable to keep the pace with the rapidity of the charges in the financial system.
All these factors – deregulation, competition, innovation, economic recession, political instability, escalating inflation, and frequent reversal in monetary policy have combined to create a challenging and precarious financial environment for banks. Consequence of the new financial environment has been rapidly declining profitability of the traditional banking activities. Thus, in a bid to survive and maintain adequate profit level in this highly competitive environment, banks have tended to take excessive risks. But, then the increasing tendency for greater risk taking has resulted in insolvency and failure of a large number of the banks [9].
The continuing deterioration in the financial health of the banks and increasing incidence of bank failure since deregulation have raised question about the nature and state of the Nigerian banking sector. 1. Statement of the Problem
It is a known fact that banks play
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