INFLUENCE OF FINANCIAL GLOBALIZATION ON THE PERFORMANCE OF THE BANKING SECTOR IN NIGERIA

Abstract

The persistent uncertainty surrounding the influence of financial globalization on the performance of Nigeria’s banking sector has raised critical policy and research concerns. This study examines how financial globalization, measured by the KOF Financial Globalization Index, the Chinn Ito Capital Account Openness Index, and Gross Capital Inflows (% of GDP), affects bank credit growth in Nigeria from 2015 to 2025. Using an ex-post facto research design and secondary data sourced from the World Bank, KOF Globalization Index, Chinn–Ito Database, and the Central Bank of Nigeria, the study employs descriptive statistics, correlation analysis, diagnostic tests, and panel regression techniques. The results reveal that financial globalization indicators significantly and positively influence bank performance: the KOF Index, capital account openness, and capital inflows all have a strong, statistically significant impact on bank credit growth, explaining about 78% of its variation. These findings confirm that increased financial integration enhances liquidity, efficiency, and credit expansion in the Nigerian banking sector. The study concludes that financial globalization promotes banking performance when supported by sound macroeconomic and regulatory frameworks. It recommends that Nigeria should deepen financial integration, implement gradual capital account liberalization, and encourage long-term productive capital inflows to sustain banking growth and stability.