236 African J. Accounting, Auditing and Finance, Vol. 6, No. 3, 2019 Copyright © 2019 Inderscience Enterprises Ltd. Financial instability and performance of banking sector in Nigeria: an evaluation Clementina Kanu* and Anthony Chukwuma Nwali Department of Accountancy, Business Administration and Banking and Finance, Alex Ekwueme Federal University, Ndufu Alike Ikwo, Ebonyi State, Nigeria Email: srmenfu2009@gmail.com Email: nwali.anthony@funai.edu.ng *Corresponding author Abstract: This study critically evaluates the financial instability and the performance of banks in Nigeria as regards to its causes and implications. This critical evaluation required the formulation of some testable hypotheses to confirm the effect of financial instability in the performance of banking sector. The results obtained confirmed that financial instability adversely affect the performance of the banking sector, has significant relationship with the level of unemployment in the banking sector; as it caused retrenchment of staff due to inability of banks to meet up with their obligations and as an the attempt to reduce operations costs. The study concludes that government as well as CBN should formulate policies that will enhance in flow of fund in the system, eliminate fraud and non-performing credits. We recommend that banks should diversify their lending activities to the agricultural sector and tourism, encourage export activities and involve in investment opportunities. Keywords: financial instability; performance; causes; consequences; currency swap; employment; banking sector; poverty elimination. Reference to this paper should be made as follows: Kanu, C. and Nwali, A.C. (2019) ‘Financial instability and performance of banking sector in Nigeria: an evaluation’, African J. Accounting, Auditing and Finance, Vol. 6, No. 3, pp.236–259. Biographical notes: Clementina Kanu received her Doctorate in Finance from the Abia State University in Nigeria. She is an associate member of the Institute of Chartered Accountants of Nigeria and Chartered Institute of Bankers of Nigeria. She specialises in accounting and finance. She is currently with the Department of Accounting, Business Administration and Banking and Finance at Alex Ekwueme Federal University, Ndufu Alike Ikwo, Ebonyi State and teaches accounting at this university. Anthony Chukwuma Nwali lectures with the Alex Ekwueme Federal University, Ndufu Alike Ikwo, Ebonyi State, Nigeria. He mainly teaches at undergraduate and postgraduate levels in the areas of career management; corporate planning, human resource management, entrepreneurship program and cross-cultural (international business management). His research interests cuts across different fields of management such as investigation of human