AABSTRACT

This study analyzed the impact of financial reforms on commercial banks performance in Nigeria using the ordinary least square method testing approach to Co integrate over the period of 1980-2011. The estimated results suggest that both commercial banks stipulated cash reserve and other variables used in the model play important role in commercial banks performance. The most striking finding amongst others is that the stipulated reserve has a positive and significant impact on the performance and profitability of commercial banks. With multiple coefficient of determination R2=94.1% showing that total variation in commercial banks profitability is caused by cash reserves, weighted average interest rates (deposit rates), maturity structure of loans and advances and sectoral distribution of loans and advances with reference to the commercial banks. The empirical evidence suggest that financial reform indicator in the form of commercial banks stipulated cash reserve are in part responsible for future change in commercial banks profitability and performance in Nigeria. The study recommends amongst others a reform of certain strict conditions of the financial policies on commercial banks that will discourage investors and entrepreneurs in making investment decision of either starting new businesses or expanding existing ones through the help of cash borrowed from commercial banks which in turn will enhance their productivity and performance as a panacea for commercial banks performance.