PREFACE
The system of Banking arose as a
result of the development of paper money. In olden days when people were using
system of exchange “Barter trade†where goods are exchanged for good. The
British Gold smith formed the habit of keeping peoples valuables like gold and
issue receipts, which were being stored by the Gold smith until later dates.
From these, the system of Banking
started developing till it reached its stage now in the world.
In Nigeria, the first indigenous bank
was National Bank of Nigeria (NBN) which started operation in 1933 which was
after the establishment of Africa Banking Corporation (AB) in 1892. British
Bank of West Africa (BBWA) was then established in 1893 and started operations
in 1894.
Then this African continental
Bank PLC (ACB) followed in 1947 before other bank started to exist.
The performance of banking
industries in Nigeria
cannot be over emphasized but it has contributed a lot in the development of
Nigerian business.
Nigerian banks have not performed
up to its expectation over the years of its establishment. The system has
experienced a lot of short falls, which will be highlighted in this write-up.
Due to changing economy of the
nation, banking system is expected to play a vital role in the Nigerian
business economy.
The consumers of this project
will understand the development of Nigeria banking system, the problem
facing it, cause of the problems and also means of preventing future problem in
the system.
PROPOSAL
Banking in Nigeria has
gone through very changes within this decade. The industry has grown beyond
optimistic expectation. Over the period, the number of banks expanded five
fold, banking operations were substantially deregulated, competitions increased
and banks were forced to be more innovative and service oriented.
Banking system is expected to
offer effective and efficient services to its customers and the economy as a
whole.
It is seen that a bank with
limited problem will support and revitalize a respectable and dependable
banking system.
Unfortunately, the uncontrolled
rate of growth of the industry has produced undesirable side effects like increase
in fraud and other form of banking malfeasance cash shortages while
mismanagement, bankruptcy and illiguidity are found to cut across the whole
banking system through the activities of board members.
These inspired me a lot to write
on the project topic:
The problems of banking system in
Nigeria
Chapter one serves as an
introduction of the topic, which ex-rayed issues likes: Background of the
study, statement of the problem, purpose or objective of the study,
significance of the study and limitation of the study.
Chapter two is purely based on
the review of related literature 1 used in the course of my study.
Chapter three dealt on research
design and methodology, that is sources of my data secondly source only
location of the data and method used in collecting data, literature work only.
Chapter four is purely based on
the summary of my findings.
Chapter five is my recommendation
and conclusion.
TABLE
OF CONTENT
TITLE PAGE
APPROVAL PAGE
PREFACE
PROPOSAL
ACKNOWLEDGEMENT
DEDICATION
CHAPTER ONE
1.1 Background
of the study
1.2 Statement
of the problem
1.3 Purpose
/objective of the study
1.4 Significance
of the study
1.5 Limitation
of the study
1.6 Definition
of terms.
CHAPTER TWO
Review of related literature
2.1 Definition of a bank
2.2 Types of banks and their
functions.
2.3 The role of banks in the
National Economy
2.4 Types of problem facing
commercial banking industry in Nigerian.
CHAPTER THREE
RESEARCH DESIGN AND METHODOLOGY.
3.1 Source of data (Secondary
data only)
3.2 Location of data
3.3 Method of data collection (literature
work only)
CHAPTER FOUR
4.1 Findings
CHAPTER FIVE
5.1 Recommendation
5.2 Conclusion.
CHAPTER
ONE
INTRODUCTION
1.2
BACKGROUND OF THE STUDY
Banking business started as far
back as the seventeenth century. When the receipts issued by Goldsmiths to
depositors were used as a means of exchange in commercial transaction. Because
these receipts were accepted generally, they became transferable too.
A bank is an institution where
money and valuables are kept for safety purposes. Bank also lend money known as
loan, pay out money on the customers order by means of a change and bank draft
and also give over draft to customers.
The structure of banks can be
grouped into the following namely.
CENTRAL BANK This is the
apex financial institution which is charged with the responsibility of managing
the cost, volume availability and direction of money and credit in an economy
with a view to achieving some desired economic objectives.
This was established in March
1958 and started full operation by 1st July, 1959 which was after
many banks like West African Currency Board (WACB) in 1912, and the
international bank for Reconstruction and Development (IBRD) in 9155 failed to
perform their objectives, and they later folded up.
COMMERCIAL BANK: They are
financial which carry out the ordinary banking business of receiving deposits,
advancing loan, discounting bill and offering related services to the general
public. This started in Nigeria
in 1892 with the establishment of African Banking Corporation and folded up in
1893. Then British Bank of West Africa (BBWA) was established in 1893, started
operation in 1894 and later fold up too. Many other banks came into existence,
which equally folded up. This is classified into main group, which are as
follows.
INDIGENOUS BANK: These are banks
fully owned and controlled by Nigerian citizen including government. The first
Indigenous bank in Nigeria
was the National Bank of Nigeria (NBN). Which started operation in 1933
followed by African Continental Bank LTD (ACB in 1947.
MIXED BANK: These are bank
jointing owned and controlled by foreigners and Nigerian Citizens including
government.
FOREIGN BANKS (EXPATRIATE BANK):
These are bank fully owned and controlled by the foreigners.
The Nigerian indiginization Act
of 1972 converted most of these foreign banks, which was later phased out long
time.
However, the 1995 budget has
reintroduced the foreign (expatriate) trade in which banking system is an
integral part of it.
MERCHANT BANK: This is a bank
that specialize in providing who engaged in whole sale banking, medium and long
term financing, equipment leasing debt factoring, investment management,
acceptance bills and management of unit trust. This was established in 1964.
DEVELOPMENT BANK: This is bank
which specialize in providing long term fund for industrial, agricultural,
commercial and mortgage development.
Also, it helps entrepreneurs by
providing loans and consulting services to them. This is classified in the
following groups namely.
NIGERIAN INDUSTRIAL DEVELOPMENT
BANK (NIDB)
This was established in 1964 to
replace the investment corporation of Nigeria. This assists the public
and private sector companies.
NIGERIAN BANK FOR COMMERCE AND
INDUSTRY (NBCI) This was established I 1973 to see to the financial
implementation of the enterprises promotion decree of 1973. This assists the
indigenous businessmen.
NIGERIAN AGRICULTURAL AND
CO-OPERATIVE BANK (NACB) This assists the agricultural sectors individual
farmer and co-operative bodies and is fully owned by the federal government.
This was established in 1973 with
a capital of twelve million naira (N12 million).
FEDERAL MORTGAGE BANK (FMB) this
is a bank established by the government to help people build house by giving
them long-term loans. The customers pay back what they own the bank by
mortgaging the land and house till they finish what they are owing.
SPECIALIZED BANK: This is another
types of bank which was established by the government and it includes the
following namely.
PEOPLES BANK OF NIGERIA: This
is set up by the Nigerian government in 1989 to help petty traders. They also
provide loans in-group at no interest rate but an administrative cost of
fifteen percent (15%) of the loan.
COMMUNITY BANK: This is
self-sustaining bank owned and managed by a community or a group of communities
to provide financial services to that community. This was established in1990.
Banking system is the system at
which banks operate. This is divided into four groups namely.
UNTIL BANKING: This is a types of
banking system where the bank involved operate without branches. This is
commonly found where commercial bank exists.
BRANCH BANKING: This system
relate to a situation where there are few bank with a large number of branches.
This then falling the readers that the bank seen here operate with branches.
GROUP BANKING: This system is a
situation where three more independent banks are brought together under one
control through the exercise of majority share stock ownership.
Despite the creation of all these
banks by the government to and entrepreneurship development. The Nigeria banking
system still encounters a lot of problem, which has disrupted its operation in
the country.
1.2 STATEMENT OF THE
PROBLEM
The problem in a nutshell
includes such practices as fraudulent activities and mismanagement by bank officials
poor, liquidity and unavailability of adequate credits to deserving customers.
The phenomenon technically referred to as “Bank distress†has become a regular
feature in the Nigeria
banking industry. It connotes the erosion in the capital base of the
enterprises, which is commonly traceable to indigenous banks.
Nigerians set up these banks as
earlier mentioned with sole objective of meeting the business needs of follow Nigeria. For
insurance the National bank, when established in1933, work towards catering for
the interest of Nigerian. Which aimed at assisting indigenous companies and
individual who were victims of the discriminating practices of foreign banks.
These banks have achieved a lot in the country since their inception
irrespective a very serious set backs caused by unco-operative attitudes of
bank delfors and hard regulatory polices as well as unpatriotic attitudes of
the citizens.
1.3 PURPOSE OF THE STUDY
The purpose of this project is to
identify and provide possible solution to the problems in the Nigerian banking
industry.
So, having identified the
problems to which this study address itself, the researchers shall in this
work, make a critical insight into the problems of banking system in Nigeria and
determine the effects and reactions of the situation on the following.
i)
The profitability of the bank.
ii)
Their reaction to the various policies of the
government through
Central bank of
Nigeria
and Nigerian Deposit Insurance Corporation to correct the irregularities.
iii) The
overall impact of these two situations on the bank existence and to their
customers.
1.4 SIGNIFICANCE OF THE STUDY
It is of importance for banks and business organization to know the
cause of the problem in the
banking industry and the possible ways of solving them.
It will also aid most banks and
business organization to realize the need to encourage the growth in Nigerian
banking industry. That our banks should not be allowed to die having lived to
their responsibilities.
The projects will also make
Nigerians realize the need for hones try, handwork and patriotism so as to
encourage and inculcate banking habit not only to the masses but also to the
rural dwellers.
Also, this project will serve as
material for future research, economists and the economy of the country.
1.5 LIMITATION OF THE STUDY
The problem of Nigeria banking system is a very broad topic but
this project will concentrate on the indigenous banks with its scope being
limited to the African Continental Bank PLC, Enugu, which has experienced in recent times
a big short fall in its operation.
The Nigerian Deposit insurance
Corporation (NDIC) which was set up to monitor the activities of these falling
bank in Nigeria declared the bank (ACB) in 1993 as one of the banks distressed.
Other limiting factor as to the
successful conclusion of the project was the inability of the members to visit
other banks that are distressed at Enugu
and other Eastern zone due to the limited time factor. Owing to this fact, the
members of the group decided to make do with the available data.
1.7 DEFINITION
OF TERMS
The terms used in this work needs
to be defined to facilitate the understanding of the reader. As one of the
greatest Greek philosophers Aristotle (348-322BC) would put it, he says,
“Before a discussion can be intelligible there must be a definition of terms.
Definition of bank or banker:
It can be defined as any person or corporation that provides the minimum
banking services and which is licensed as a bank by the federal government of Nigeria as a
banking institution.
Banking system is the
system at which bank operate.
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