THE EFFECT OF BANK DISTRESS AND ECONOMIC GROWTH OF NIGERIA

THE EFFECT OF BANK DISTRESS AND ECONOMIC GROWTH OF NIGERIA

INTRODUCTION

A bank shortage could have a significant negative impact on Nigeria’s economic growth. Bank failures can reduce lending, investment and economic activity. This could slow down the growth rate of the economy as a whole. A shortage of banks can also lead to a loss of confidence in the banking sector. When people lose trust in their banks, they may withdraw their deposits, which can exacerbate the difficulties. This could reduce the stability of the entire financial system and adversely affect the economy as a whole. Moreover, banking crises can also lead to a reduction in available credit, which can have a negative impact on businesses and consumers. This could lead to lower spending and investment, further slowing economic growth. Note, however, that the impact of the banking crisis on economic growth can be mitigated through effective policy action. For example, the Central Bank of Nigeria (CBN) can take action to address the banking crisis and restore confidence in the banking sector. CBN can also provide liquidity assistance to distressed banks to prevent liquidity crises from occurring.