. also, the capital market received a boost as several banks recorded successes in their initial public offers ( ipos ). the consolidation exercise also impacted on the payment system positively as the fewer number of banks made it easier to deploy the new automated clearing systems and also reduced the length of time spent on the clearing floor. concerning supervision, the relative ease of having to oversee 24 banks as against 89 deserves mention. 13. in spite of these positive developments, a new set of problems emerged and threatened the financial system from 2008, coinciding with the global financial crisis. the surge in capital put pressure on the availability of human capacity in the sector and coupled with poor corporate governance and risk management frameworks this led to our recent experience with margin loans and other high risk investments. consequently, when the capital market bubble burst, the balance sheet of banks became eroded to the extent that some of them remained for some time on “ life support ” from the cbn. inter - bank rates spiked as banks tried to borrow at any rate in order to remain afloat, the size of non - performing loans significantly increased, customer panic re - emerged and several instances of unethical conduct among the managements of banks were revealed. in addition, the critical question “ are our banks playing the pivotal role of driving development ” could not be answered in the affirmative. it was this scenario that set the stage for the most recent set of reforms. 14. the reforms could be broadly divided into two. the first part of the reform focused on ensuring that the nine banks, which the cbn / ndic special examination revealed were in a dire state, were rescued. some of the actions included the reduction of cash and liquidity ratios, expanded discount window operations, which enabled the banks to borrow for up to 360 days from the cbn. it also admitted non - traditional instruments, like commercial papers, bis central bankers ’ speeches promissory notes and bankers ’ acceptances in the discount window. interbank lending was also guaranteed to encourage banks to lend among themselves. the sum of n620 billion was injected into eight banks as a direct rescue package, while corporate governance was enhanced with the appointment of new management teams. over all, we can now say that the system has been restored to the path of stability. 15. the second aspect of the reforms is couched in terms of medium to long term objectives. under this, financial sector stability is emphasized alongside the need to position the banks to provide funding for the development of the real

and capitalism at the global scale, or even the systems of feudalism and republicanism in different parts of nigeria and the outcomes for poverty and wealth creation, one can hypothesize that institutional arrangements make all the difference. institutions drive human progress, and while some unleash, others inhibit human progress. as a layman, it is evident from all over the world that wherever the rule of law prevails and property rights and contract enforcements are more effective, progress has been faster than otherwise. in nigeria, examples abound as to how alternative legal - institutional infrastructure emasculated development. the constant changes or suspension of aspects of the constitution during military rule created uncertainties. there was also unpredictability in the laws governing the society as specific laws could be enacted overnight and with retroactive effects. such uncertainties were inimical to investment and property rights, and hence retarded growth. one is not sure whether the indigenization decrees did not retard the process of industrialization and private enterprise in nigeria. it is possible that the action could have created uncertainties regarding foreign ownership of production in nigeria and hence retarded fdi which we are later to seek after. a legal system that conferred powers of monopolies to the state over telecommunications, power, and some infrastructure obviously retarded private investment in these areas. an institutional framework ( a legal system a la the constitution ) which has proliferated states and assured them of unconditional access to ‘ statutory allocation of revenues from the centre ’ destroys the known basis of human progress - competition. a constitutional provision that allocates such resources to states with powers to spend without any strong oversight institution has created a rentier system and perpetuated a culture of ‘ cake sharing ’ without any attention to ‘ cake baking ’ especially at some of the lower tiers of government. it has also destroyed the fundamental umbilical cord between the state and business. the relationship between state and business is a strategic and mutually beneficial one : states depend on businesses to create jobs and to pay taxes to the state ; in turn states provide the enabling environment to help businesses thrive. the dependence on ‘ statutory allocation ’ has destroyed that relationship in most cases to the extent that many states hardly pay attention to enterprise development. if they can get all the money they need from ‘ allocation ’, why care about businesses whose taxes amount to pittance? today, not many states care about creating an environment conduci