CHAPTER ONE
1.0
INTRODUCTION
It is more important or convenient to trace the
origin of banking and it meaning before moving into the causes of bank distress
in Nigeria
economy.
Banking originated in England through the activities of
the Gold Smiths, who by often keeping money in safes for their customers
realized that they could make gain with it by lending to other people on the
order hand, they realized that they could cover for unexpected demand by paying
interest to depositors.
The process soon attract many
depositors and borrowers and this formed the genesis of banking business fully
develop England;
it was transplanted to West African during colonialism.
There has
not been any acceptable definition of what a bank is or who is a banker.
Several attempt have been made to offer a comprehensive of acceptable
definition of the term banker.
J.W.Gilbert
defined a banker as a dealer in capital or more properly a dealer in money. He
is an intermediate between the borrower and lender.
He borrows
from one party and lends to another.
This
definition emphasis on two traditional functions of bank, which is mobilization
of deposit and granting of loans and advances.
In Nigeria the
banking enacted in 1952 defined banking as the business of receiving from the
public, on current account money which is to be repayable on demand by cheque
and of making advances restricted the establishment of banks and practice of
banking to companies with valid licenses.
From these
definitions, one can say that a banker is any person or corporative that
provides the minimum banking services and which is licensed as bank from
federal government of Nigeria
as a banking institution.
These minimum
banking includes:
Receiptance
of deposit from customer, making payment locally or outside, Nigeria,
granting loans and advances, trading in securities clearing cheques and fimilar
institutions.
The rules
to be followed for this establishment of a bank are contained in a banking
decree
1996
(Section 2 ) which is now replaced by decree No 24/28 of 1991, which gave the
CBN the power to license banksâ€.
The banks
are Nigeria can be grouped
into three commercial banks, merchant banks and Development bank with the
central bank of Nigeria
as the Apex bank. Each of these groups renders different types of services to
the public as conferred on them by the CBN.
Infact,
commercial banking in a recent development, most of them are off-shorts of
large foreign commercial banks with headquarters in Europe.
America and Asia.
Indigenous
banking in Nigeria
is still in its infact stage. The history of commercial banking in Nigeria data to 1892, when the African banking
corporate in London opened a branch in Lagos in 1894 the bank of British west Africa (BBWA), now
the first bank was established in Lagos
and it took over the African banking ltd.
In the
indigenous sector, the national banks of Nigeria (NBN) was established on 11th
February 1933. This was followed by Africa continental
bank ltd.
Others are:
The British and French bank ltd, now united bank for (UBA) plc which was
established in 1949: co-operative and commercial bank (CCB) ltd wema bank ltd;
orient bank ltd etc.
The period
to 1962 was an epoch of bank proliferation in Nigeria.
During the
year under review, an about thirty-nine (39) bank was established.
The sudden
bank boom was attributable to inadequate banking regulation
The first
commercial bank that sprang up was expatriate bank. However, owning to
discriminatory lending policies exhibited by these banks against African, the
need for an indigenous bank arose, besides, African customers were unable to
provide collateral securities for loans.
It was on
this footing that indigenous bank emerged parity as a reaction against
non-liberal credit policies of expatriate banks and partly as an instrument to
mobilized local resources into effective participation in development of the
nation.
The growth
in number of commercial bank started in 1979 and above.
The
introduction of foreign exchange market under the structural adjustment
programmer fuled it the more.
But among
the commercial and merchant banks established in Nigeria
federal government and Nigeria
citizens own 60% of capital stock of each bank.
40% in
effect belong to foreign investors, namely European and America Corporation and
other financial interests. This group does not include indigenous bank whose
stock are purely owned by Nigerians.
1.1 BACKGROUND
OF THE STUDY
The banks and issue of
distressed being a lesson and warning to other financial institution and
commercial a whole, this research work will interest them to adopt certain
strategies which they will use in financial obligation that will not result
problem of bad debt recovery which has resulted to failure of some financial
institution in reigns of appropriate evaluation loan disbursement
(mismanagement) and the liquidity and profitability management are serious
problem facing and coursing bank fraud and issue of distress.
1.2 STATEMENT OF THE PROBLEM
It is observed that banks in Nigeria are the
private about all other commercial transaction revolve. The need for effective,
efficient and satisfactory banking services cannot be over emphasized, yet the
confidence of most customer continuous to ware-especially in the commercial
banking sector where the incidence of distress is more pronounced and where the
write will lay much emphasis on majority of commercial banks are fully or
partly owned by states government.
There have
been a lot of misconception about the relationship between the banks customers
and government.
The
customers accuse the banks of inefficiency and time wasting in payment of
demand deposit (insufficienty of fund) where as the banks accuse the government
for not repaying back their debt. Government on the other hand accuse the bank
for inefficiency and gross mismanagement of banks fund it is equally worth
nothing that the problem of under capitalization, board room, conflict,
constant change in staff management and bad are the major factors which
contributed to the distress of most in banks in Nigeria.
1.3 OBJECTIVE OF STUDY:
The objective of this study
will be summarized as follows:
1. To find out whether
under-capitalization affects bank performances Nigeria.
2. To find out if
macro-economic problem like: The use of expansionar policies, the use of
external credit caused by the expansionist policies over-valuation of naira and
instability in macro economic policies contribute to financial distress in
Nigeria banks.
1.3 3. To find out the extent
in which the incidence of non-performing loans affects state owned commercial
bank in Nigeria.
4. To find out how management
and board conflict contributed to the downfall of banks in the country.
5. To find out possible
solution to eliminate distress in Nigeria banks.
1.4 SIGNIFICANCE OF STUDY
Despite the accusation of banks
customers and government functionaries, about inadequacy of fund and problem of
loan recovery which are the major problems in state owned commercial banks, the
beneficiaries of this research are: customer because demand deposit will always
be paid and public confidence in the banking industry restored. Government will
also witness progress and continuity in their commercial banks, thus sanity
will be restored and economic activities geared up.
1.5 SCOPE AND LIMITATION OF STUDY
This study will be based in
find out the problems facing banks in this country and possible solution to
avert the current prevailing situation in the banking industry.
LIMITATIONS: Some
of the factors containing the researcher are as follows:
1. FINANCE: The success of any
researcher work has bearing on the extent to which it is financial.
2. TIME FACTOR: Research work of this nature requires time
for efficient and effective collection compilation and presentation of data
collected.
3. NON-AVAILABILITY OF
RELEVANT MATERIALS:
Most of the banks staff was not
prepared to reveal some relevant materials, which could have ended the research
with a work that stands the test or time.
4. PRESSURES OF WORK
The researcher in addition to
this project has many academic commitments.
He has to study nine (9)
courses with a total of 2 credit loans including this project work to graduate
on OND programmer.
REFERENCES
C.B.N. “Changes in financial
structuresâ€
Central banks of Nigeria
Annual report 1994
Ebhodale J. (1992) “Distress
signals from banks state
Owned bank are sinkingâ€
The financial post Vo l5
No 2 August / September 1992
NDIC (1993) “ Capital and
ownership structure of insured
Banks Nigeria deposit insurance
Corporation Annual report
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