This study examines how global economic downturns impact both banking and non-bank financial institutions in Nigeria, spanning from 1995 to 2025. The motivation behind this research stems from a series of global financial crises, such as the Asian financial crisis, the 2007–2009 global financial crisis, the oil price shock from 2014 to 2016, the COVID-19 pandemic, and the recent waves of global inflation and geopolitical tensions. These events have had a profound effect on financial stability in emerging markets. The primary goal here is to evaluate how these global economic shocks affect the performance and stability of financial institutions in Nigeria. To conduct this study, we used an ex-post facto research design, relying on secondary time-series data sourced from the Central Bank of Nigeria (CBN), the World Bank, the International Monetary Fund (IMF), the National Insurance Commission (NAICOM), the National Pension Commission (PenCom), and the Nigerian Deposit Insurance Corporation (NDIC). For data analysis, we employed the Autoregressive Distributed Lag (ARDL) technique. Our findings indicate that indicators of global economic downturns—like inflation, fluctuations in exchange rates, and a contraction in global credit—significantly diminish bank profitability, lead to an uptick in non-performing loans, and compromise asset quality. Likewise, non-bank financial institutions face lower investment returns, a drop in premium income, and slower asset growth during times of global economic turmoil. The study also highlights that these global economic crises adversely affect the overall stability of Nigeria's financial sector. In conclusion, despite various regulatory reforms, Nigeria’s financial system remains quite susceptible to external economic shocks. We recommend implementing stronger macroprudential regulations, enhancing risk management practices, and diversifying the economy to bolster the resilience of the financial sector.
Chigozie et al. (Tue,) studied this question.