Banks essentially loaning money to themselves used the cash for all sorts of alleged shady deals, including buying private jets or manipulating stock prices -- and that was only part of the problem.

"The banks did not fail," Central Bank Governor Lamido Sanusi said in a strikingly blunt speech earlier this year. "They were destroyed and brought to their knees by acts committed by identifiable people."

Nigeria is seeking to emerge from a financial crisis that boiled over last year by taking actions that may come as a surprise to those weary of hearing about the country's crippling corruption.

Officials are in the process of setting up a "bad bank" to soak up billions of dollars in deadbeat loans and have cleaned house at financial institutions suspected of dubious practices.

The bourse regulator announced last week that it was firing the head of the stock exchange after allegations of financial mismanagement in a move seen by some as another victory for reformers.

Despite all of that, observers say massive work clearly remains to set the oil-rich country on a path that could finally allow it to exploit its huge potential.

There is also the question of whether financial reformers are being allowed to push ahead because elections will be held early next year. President Goodluck Jonathan, who has pledged to reduce corruption, is expected to run.

Victor Ndukauba, research director at Afrinvest financial firm in Lagos, said the removal of the head of the stock exchange could be seen as "reformers getting the upper hand."

He also said the bank changes have been a positive step, but officials should take their efforts further.

"What made banks go down that road in the first place? Corporate governance and risk management are extremely crucial," Ndukauba said. "Banks can't be left to one individual because he can run the company into the ground."

The factors that led to the banking crisis in Africa's most populous nation are similar to those that caused the global financial crisis -- but with a twist.

Flat-out corruption, volatile oil prices and inflated banking stocks combined with the kinds of questionable loans that became standard practice in many countries.

Analysts point to the consolidation of the country's banks that began in 2004 as the event that unintentionally set the whole thing in motion.

The government decided that banks needed to be larger to adequately finance the economy. That translated into rules requiring at least 25 billion naira (166 million dollars, 125 million euros) in capital.

As a result, the number of banks eventually shrank from 89 to 24. They were bigger, but not necessarily better.

In certain cases, huge capital increases were controlled by bank executives who had never dealt with such sums before.

One of the problems was the purchasing of private jets and estates, Sanusi has said. Banks also began handing out large numbers of dubious loans for real estate and stock purchases.

"Millions of credits were granted to buy stocks because of rising prices," financial consultant Abolaji Oladimeji Odumesi said.

"The bubble began to burst because the prices were not realistic. They were not market-driven but being manipulated by fraudulent dealers and brokers."

Sanusi, a bow-tie wearing intellectual who also studied Islamic law, took over as central bank governor in June 2009.

A month later, he began what some call the "Sanusi tsunami."

Executives from eight banks were removed from their posts and a bailout of 600 billion naira was announced. A list of people have been charged in connection with the alleged banking corruption.

To continue with the clean up, the "bad bank" was signed into law a couple weeks ago.

One banker in Lagos, Sunday Adeola, called the mechanism "the messiah the financial sector has been waiting for." Others, however, said it was a good start.

"It's a means to an end -- it's not an end in itself," said Afrinvest researcher Babatunde Obaniyi.

The same might be said for the moves at the stock exchange, with more surprises possibly on the way.

In announcing the firing of its director general last week, regulators also pledged an independent investigation, citing "the gravity of the allegations around financial mismanagement of the exchange."

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