Financial Contagion, Interbank Network Topology, and Systemic Risk in the Nigerian Banking System

Financial contagion through interbank networks represents one of the most complex and destabilising mechanisms in modern banking, transmitting idiosyncratic institution-level shocks into system-wide crises through direct exposure linkages and information-driven runs. This study develops a novel network-based framework for analysing financial contagion, interbank exposure topology, and systemic risk in the Nigerian banking system. The theoretical contribution is a heterogeneous agent network model that incorporates balance sheet interdependencies, liquidity hoarding behaviour, and strategic complementarities among banks in a unified analytical framework. The empirical application uses confidential interbank exposure data requested from the Central Bank of Nigeria combined with publicly available financial statement data for sixteen deposit money banks from 2017 to 2023. The study maps the network topology using graph-theoretic measures including degree centrality, betweenness centrality, and clustering coefficients. Systemic risk is quantified through simulated default cascades under multiple shock scenarios calibrated to Nigeria's macroeconomic environment. A counterfactual analysis evaluates how changes in network structure, capital buffers, and regulatory intervention speed alter cascade severity. The theoretical framework integrates the network externalities literature, the global games theory of bank runs, and the macro-prudential systemic risk measurement literature. The study produces an original Network Fragility Index for the Nigerian banking system and tests its predictive validity against periods of observed financial stress. The PhD-level contribution lies in the theoretical model development, the novel fragility index, and the policy-relevant simulation framework. Findings are expected to provide critical inputs to the Central Bank of Nigeria's financial stability framework and systemic risk monitoring infrastructure. Keywords: financial contagion, interbank network, systemic risk, Nigeria, network topology