EFFECT OF GLOBAL BANKING ON NIGERIA  ECONOMIC SYSTEM (CASES STUDY UNION BAN OF NIGERIA PLC)

TABLE OF CONTENTS

Title page

Certification

Dedication

Acknowledgement

Abstract

Table of content



CHAPTER ONE

Introduction

Statement of the problem

Objective of the study

Research questions

Statement of research hypothesis

Significance of the study

Scope of the study

Definition of term



CHAPTER TWO

Literature Review

2.1 Meaning of Banks and why do banks exist

2.2 Regulatory Institutions in the Nigeria Banking Industry

2.2.1 Central Bank of Nigeria

2.2.2 Nigeria Deposit Insurance Corporation

2.3 Determinants of banks’ performance in an economy

2.4 Challenges of the Banking Industry

2.5 The global financial crisis


CHAPTER THREE

Research Methodology

3.1 Introduction

3.2 Research Design

3.3 Population of the study

3.4 Sampling design

3.5 Sample and Sampling Techniques

3.6 Sources of Data

3.7 Instrument of the Instrument

3.8 Administration of the Instrument

3.9 Validity and Reliability of Instrument

3.10 Method of Data analysis


CHAPTER FOUR

Data presentation and analysis

4.1 Introduction

4.2 Response to the distributed questionnaires

4.3 Analysis of data according to test hypotheses

4.4 Test of hypothesis

4.5 Discussion of the findings


CHAPTER FIVE

5.0 Introduction

5.1 Summary of findings

5.2 Conclusion

5.3 Recommendation

Bibliography

Questionnaire
CHAPTER ONE

INTRODUCTION

Before the consolidation exercise started in2o005, the Nigerian Banking Industry witnessed a lot of stress uncertainty and anxiety. This eroded the confidence of the general public which used to be great asset of the banking sector in the past. In addition, inventors and depositor’s funds were not guaranteed, thereby, making many of the banks to come under stress due to capital inadequacy. These problems greatly impaired the quality of the bank’s assets as non performing assets became unbearable and became huge burdens on many of the banks.

The financial intermediation role of the banks became heavily impaired while the macro economic activities seriously slowed down. It was again this background that the Central Bank of Nigeria (CBN) announced a major reform in the entire Nigerian Banking Industry. the recapitalization of the capital base of banks constituted the first phase of the reform policy in the entire banking sector of the Nigerian economy.

The major issues in the consolidation exercise according to Adeyemi (2005) include:
  • A minimum capital base of 25 billion naira with a deadline of 31st December 2005,.
  • Consolidation of banking institutions through mergers and acquisitions.
  • Phase withdrawal of public sector funds from banks, beginning from July, 2004.
  • Adoption of a risk focused and rule based regulatory framework.
  • Zero tolerance for weak corporate government, misconduct and lack transparency.
  • Accelerated completion of the Electronic Financial surveillance system (E.Fass)
  • The establishment of asset management companies.
  • Promotion of the enforcement of dormant law.
  • Revision and updating of relevant laws.
  • Closer collaboration with the Economic and Financial crime commission (EFCC) and the establishment of the financial intelligence unit.
  • The two outstanding issues in the reform initiatives that have attracted a lot of concern and reaction because of its peculiarities.
  • The recapitalization requirement of 25 billion by Banks before the end of 31st December, 2005.
  • Consolidation of Banks through mergers and acquisitions.


1.2 STATEMENT OF PROBLEM
The reasons for this crisis are varied and complex but largely it can be attributed to a number of factors in both the housing and credit markets, which developed over an extended period of time. Some of these problems include: in ability of home owners to make their mortgage payments, poor judgement by the borrower and/or lender.

Speculation and overbuilding during the boom period, risky mortgage products high personal and corporate debt levels, financial innovation that distributed and concealed default risks, central bank policies and regulation (Stiglite 2008).

Due to low interest rates and large inflow of foreign funds, Subprime lending./borrowing inflow of investment became very attractive in both US and the UK. Since the demand for housing was rapidly rising in the US, most investors and home owners took mortgage loans and interest in housing. The over all US home ownership rate increased from 64% in 1994 (about where it was since 1980) to peak in 2004 with an all time high of 59.2%.

Poor credit rating: Due to securitization practices, credit rating agencies have the tendency to assign investment grade rating to Mortgage – Backed securities (MBS) and this makes loans with high default rate to originate, packed and transferred to others.

High-risk loans: There appears to be widespread agreement that period of rapid credit growth tend to be accompanied by loosening lending standards (Dell Arriccia, Igan and Laeven, 2008).


1.3 OBJECTIVE OF THE STUDY
The Nigerian banking industry experienced remarkable changes after the consolidation exercise. Shortly after the recapitalization of the capital base in the country, the public confidence in the industry became very high which can be seen from the increase in bank’s depositors’ funds. The aim or objective of this research study therefore is to examine the impact of the current global financial crisis on the Nigerian banking industry. The outcome of this research study is expected to assist Nigerian Policy makers, banks management teams and banks regulatory bodies in Nigeria in the following ways:
  • To know the major causes of the financial crisis in Nigeria
  • To determine the extent of the impact of the global financial crisis on the Nigerian banking industry and the entire company.
  • To determine various options that could cushion the impact as well as avoid future occurrence.
  • To examine the establishment of asset management companies.


1.4 RESEARCH QUESTIONS
i What was the position of banks before the global financial crisis?

ii What are the impacts of the global financial crisis on the Nigerian banking industry?

iii What made the crisis spread to the Nigerian banking Industry?

iv Do you think, there is any significant relationship between poor management of capital base of bank and the preset financial crisis in the Banking Industry?

v. Do you also think that, the recapitalization exercise that change the ownership structure of bank is significance related to the present financial crisis in the banking industry?

vi. Is there any direct relationship, between top level management of consolidated banks and the present financial crisis in the Nigerian banking industry?


1.5 STATEMENT OF RESEARCH HYPOTHESIS
Ho: Null Hypothesis

Hi: Alternative hypothesis

Ho: There is no significant direct relationship between the top level management of consolidated banks and the present financial crisis in the Nigerian Banking Industry.

Hi: There is significant direct relationship between the top level management of consolidated banks and the present financial crisis in the Nigerian Banking Industry.

Ho: There is no significant relationship between poor management of the capital base of consolidated banks and the present financial crisis in the Nigerian banking industry.

Hi: There is significant relationship between poor management of the capital base of consolidated banks and the present financial crisis in the Nigerian Banking Industry.


1.6 SIGNIFICANCE OF THE STUDY
It is believed that the recommendation based on the findings of this research work would be useful in re-orienting the regulators of the effect of global banking on Nigeria Economic System towards improving or facilitating efficiency and effective banking industry that could guarantee rapid economic growth and development for the entire nation.

Therefore, the finings and recommendation would be authenticate quality as a preferential means of finding and other forms of financial assets an capital.


1.7 SCOPE OF THE STUDY
This study will covers the activities of the “Union Bank Nigeria Plc”. Therefore, the scope of this research project would be limited to Union Bank of Nigeria (UBA) plc. as a case study.


1.8 DEFINITION OF TERMS

1. Banker: This can be defined as a dealer in capital or more appropriately a dealer in money.

2.Banks: This is defined as intermediate parties between the borrower and the lender.

3.Banking is defined as the business of receiving money from outside sources and deposit irrespective of the payment of interest.

Capital: This is defined as a factor of production, not required for immediate consumption but to help expedite the production process, and therefore, capital is often regarded as the nucleus of economic development of a nation.

Employees: An employee is also known as somebody who is paid to work for an organization according ot the direction of an employer, manager or supervision.

Management: This is the act of coordinating the resources of an organisation through the process of planning, directing, controlling and organizing in order to achieve the organisation goals and objectives.

Promotion: This is also t he movement of an worker to a more important position with greater responsibilities.

Offering liquidity: Liquidity in Banking refers to assets that can easily be converted into cash. Money in the form of cash is regarded as the most liquid asset in the banking industry.

Payment services: A Bank is under obligation to pay back to the customer any amount as specified by the customer year doing to the value of the account held.

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