Assessment of Financial Stability in Emerging Economies: Evidence from Nigeria

The financial system stability portends the ability of the financial system to resist any unexpected adverse shocks from internal and external contexts and at the same time enable continuous unhindered functioning of the intermediation process. This paper appraises the stability of the financial system in an emerging economy using Nigeria as a base country. Financial stability and macro-prudential quarterly data from 2007 to June 2015 were used to assess the stability of the financial system arising from the effect of the global financial crisis and the recent decline in commodity prices in the international market with its attendant negative effect on the Nigerian mono-cultural economy. The assessment result shows that despite the shocks, Nigeria’s financial system remains resilient and able to absolve all unexpected surprises’ coming from the external context in the study period as the government battles with many intervening variables to get the economy back on track. There is an urgent need to diversify the economy and generate more non-oil revenue as well as maintain continuous consistent monitoring of the financial system to ensure its enduring stability.