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The financial system in any economy plays the important role of promoting economic
growth and development through the process of financial intermediation. However, this
system was recently hit by a global financial crisis that emerged from the U.S.A in 2007.
This study empirically examined the impact of global financial crisis on Nigeria’s financial
sector using time series data that spanned from 1970 to 2010 and applied the econometric
methodology of Autoregressive-Error Correction Model (AR-ECM). The results indicate a
long run relationship between banks asset, Money Supply and the dummy variable used to
capture global financial crisis. The results also show that global financial crisis
significantly affected the banking sector negatively. The study therefore recommends that
the Nigerian government should strengthen the growth of institutions like the pension fund,
Housing fund, and Health insurance fund in order to enhance the liquidity of the financial
system. Formulation and implementation of more vigilant regulatory measures should be
adopted for the financial system in Nigeria. There should be proper co-ordination among
regulators; while the CBN is urged to continue with and strengthen the banking system
consolidation programme as well as the cashless policy.
