CHAPTER ONE
1.0. BACKGROUND OF THE STUDY
Financial instability has been in the scene of Nigerian economy for a long time. It
is obvious that the financial instability is an important topic to develop. The cost
burden associated with bank failure is so disturbing that the need for continued
study of causes of banking financial instability on both the practical and theoretical
level cannot be overemphasized. Some years back, Nigeria witnessed numerous
bank failures. Example Savannah bank, All State Trust Bank, Bank of the North,
Ganji bank of Niger limited, Owena bank, Lion bank of Nigeria limited, etc.
The central bank of Nigeria (CBN) has said that the only way the nation’s
consolidated banks could be insulated from failure is through adoption and
enforcement of corporate governance culture. Sanusi Lamido however, pointed out
that the recent failures of high profit institutions around the world such as Enron,
Parmalat, World comm., Barings bank among others, have shown that no company
can be too big to fail, stressing that a common trend that runs through these
monumental failures was poor corporate governance culture, exemplified in poor
management, fraud and insider abuse by both management and board members,
poor asset and liability management and poor regulation and supervision among
others.
Banks play very crucial roles in the process of economic development of any
country, by mobilizing funds from the surplus units of the economy and the