...BANKING REFORMS IN NIGERIA AND ITS IMPLICATION FOR ECONOMIC DEVELOPMENT A CASE STUDY OF ZENITH BANK PLC CHAPTER ONE INTRODUCTION 1.1 Background of the Study For more than two decades after independence, the Nigerian financial system was repressed, as evidenced by ceilings on interest rates and credit expansion, selective credit policies, high reserve requirements, and restriction on entry into the banking industry. This situation inhibited the functioning of the financial system and especially constrained its ability to mobilize savings and facilitate productive investment. In Nigeria, we have eighty-nine banks many of which have a capital base of less than US$ 10 million. This section will set out some of the factors that necessitated the need for major banking sector reforms. Through financial intermediation, banks are supposed to facilitate capital formation and promote economic growth by operating in a safe and sound manner. In the past, some financial institutions showed glaring inability to maintain an efficient flow of funds within the economic system. The sharp practices of some Banks together with the unsoundness of others led to a wide spread of financial sector distress and losses to depositors. It has been seen as a paradox that despite the size of the economy, the country’s reserves are still deposited in foreign Banks due to the low capacity of the local Banks. The sector has been highly concentrated structurally as the ten largest Banks account for...
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...Risk Management Still at Rudimentary Stage in Nigeria’ Deputy Governor, Financial System Stability, Central Bank of Nigeria (CBN), Dr. Chiedu K. Moghalu, recently spoke on “Risk-Ability: Risk Management Knowledge and Infrastructure for Nigeria’s Financial Services Industry,” at a Chief Risk Officers’ retreat. Obinna Chima, who was there presents the excerpts: Financial Crisis From the tulip mania in Holland in the mid-1630s to the ultimately disastrous speculative rush for the shares of the Mississipi Company promoted by John Law and his Banque Royale in Paris in the early 1700s, from the South Sea Bubble in London in the same period (to which Sir Isaac Newton lost a princely £20,000) to the great Wall Street Stock Market boom of the 1920s that preceded the Great Crash of 1929 and the Great Depression and on to the global financial crisis of 2008 – 2009, the history of finance over the past 500 years has been marked by frequent booms and busts. Historical evidence suggests, as the famous American economist John Kenneth Galbraith put it, “that the financial memory should be assumed to last, at a maximum, no more than 20 years. This is normally the time it takes for the recollection of one disaster to be erased and for some variant on previous dementia to come forward to capture the financial mind.” If this is so, and we are condemned to cycles of financial implosions that wipe out economic value, is the modern science of risk management doomed? It isn’t. The future...
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...The sector was characterized by small sized banks with high overheads; low capital base averaging less than $10million; heavy reliance on government patronage and loss making. Nigeria’s banking sector was still characterized by a high degree of fragmentation and low levels of financial intermediation up until 2004. In the light of the foregoing, banks are compelled by the Central Bank of Nigeria to raise their capital base from N2 billion to 25 billion on or before 31st December, 2005. Most banks resorted to mergers and acquisition as a survival strategy, which saw a reduction in the number of banks from 89 to 25. This study contributes to the concept of bank recapitalization by critically examining the impact of bank consolidation on the performance of banks using a sample of randomly selected Nigerian banks. It is the intention of the researcher to give more validity to empirical evidence that have been obtained by previous researchers on the subject matter. Relevance of the study The earliest set of studies evaluates the effects of bank consolidation through mergers and acquisitions comparing pre- and post- merger performance by measuring performance using either accounting or productive efficiency indicators.The results from both indicators have varied and at sometimes been contradictory. This can be explained by performance-influencing variables like size, brand name, diversification and cost reduction, there is still no reconciliation between these indicators. I intend...
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...INSIDER DEALINGS AND THE PROBLEMS OF BUSINESS ETHICS IN THE BANKING INDUSTRY IN NIGERIA. BY Adegboye Folasade Bosede Department of Banking & Finance Covenant University Ota, Ogun state. Tel: 07032678252 e-mail:sadeadegboye@yahoo.com THIS PAPER IS TO BE PRESENTED AT: THE 8TH ANNUAL CONFERENCE OF THE NIGERIAN SOCIOLOGICAL SOCIETY AT TEMPRANCE HOTEL OFF THE BELLS UNIVERSITY ROAD OTA, OGUN STATE. DATE: TUESDAY NOVEMBER 25- THURSDAY NOVEMBER 27, 2008 ABSTRACT Professionalism in banking is violated when ethical or legal fundamentals are breached or blatantly disregarded. Ethics is a strong code of morality, which for an occupation such as banking, plays an important role in the well being of individuals, businesses, national and international economies. Unethical conduct manifests itself in various ways, including insider abuse, fraudulent dealings; irregularity/inaccuracy in rendition of reports, these are problems bordering on business ethics as evident in the Nigerian banking crisis. A multiple regression analysis was used and from the summary of the finding, we can infer that the consequences of insider dealing and problem of business ethics can be disastrous and could result in loss of confidence and trust in the industry, loss of business for the institutions, shareholders, board/management disputes, operational losses, distress of the sector, and liquidation of institutions, capital flight, and stagnation of the economy. INTRODUCTION Traditionally, the role of...
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...CHAPTER ONE INTRODUCTION 1.1 BACKGROUND OF STUDY Nigeria banking sector has experienced a boom-and-burst cycle in the past 20-25 years. After the implementation of the structural adjustment programme (SAP) in 1986 and de-regulation of the financial sector, new banks proliferated mainly driven by attractive arbitrage opportunities in the foreign exchange market (Heiko 2007), but prior to the de-regulation period, financial intermediation never took off and even declined in the1980’s and 1990’s (Capirio and Kligbiel). The sector was highly oligopolistic with remarkable features of market concentration and leadership. Lemo noted that there are ten banks that control more than 50% of the aggregate assets of the banking sector, more than 51% of the aggregate deposits liabilities and more than 45%of the aggregate credits. The sector was characterized by small scale banks with high overheads; low capital base averaging less than $10 million; heavy reliance on the government patronage and loss making. Nigeria‘s banking sector was still characterized by a high degree of fragmentation and low level of financial intermediation up to 2004. This research work is motivated by the need to look into the Central bank (CBN)’s recent reform (consolidation) that employed certain measures to strengthen the Nigeria banking system by drastically increasing the minimum capital requirement from N2 million to N25 billion ($190 million-US). Through review of relevant literatures, analysis...
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...Impact of Internal Control System in Banking Sector in Nigeria | | Olaoye Clement Olatunji | | Abstract: The Central Bank of Nigeria reported that the backward development in Nigeria was attributable to weaknesses in the internal control systems of the banks. This has clearly pointed out the picture of how fraud has been penetrated in the financial strength of Nigerian Banks. In a nut-shell, the damage which this menace, called fraud has done to the banks is innumerable and needs urgent attention. Therefore, the attempt to put an end to this economic degradation, gave rise to the topic of this research study the impact of internal control in the banking sector in Nigeria with Wema Bank of Nigeria PLC as a case study. However, this study is aimed at verifying the conception that an effective and efficient internal control system is the best control measure for preventing and detecting fraud, especially in the banking sector. Data captured for this study, were analyzed through descriptive and inferential statistical methods. The descriptive analysis involves the use of percentages, tabulation and graphical presentation. While the inferential statistical method involved the use of the chi-square. The functions of fraud prevention, detection and control are interwoven, as the three works together to eliminate fraud and fraudulent tendencies. Therefore, internal control is highly significant in fraud detection and preventions in banking sector in Nigeria. | | | INTRODUCTIONInternal...
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...UNIVERSITY BENIN CITY COUSE CODE: ACC 811 TOPIC: EXAMINE THE ISSUES WHICH WERE THROWN UP IN THE CBN AUDIT OF THE NIGERIAN BANKING SYSTEM IN 2009 AND ASSESS THE EXTENT TO WHICH THIS COULD BE ATTRIBUTED TO ACCOUNTING FAILURE BY OBOR OMUEKPEN EVARISTA (MSC ACCOUNTING) EXECUTIVE SUMMARY The reform started when it became clear that poor corporate governance practices, over and undue exposure to the capital market, oil and gas sector, poor risk management practices and inadequate disclosure and transparency about the banks’ financial position characterised the Nigerian banking sector. The CBN, in June 2009 took a three –pronged approach to assess the financial condition of the twenty four (24) banks. One of the approaches was the special audit jointly carried out by the CBN and the Nigeria Deposit Insurance Corporation. The exercise highlighted inadequacies in capital asset and liquidity ratios as well as weakness in corporate governance and risk management in ten banks. These banks were found to be in distress as they failed to meet the minimum 10% capital adequacy and 25% minimum liquidity ratios. Apart from accumulating high non-performing loans, the banks were seriously exposed to the oil and gas sector as well as the capital market. Poor risk management practices in the form of necessary control measures were prevalent as the boards and managements of the banks had failed to observe established controls. Although the remaining fourteen banks had holes in their books...
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...INTRODUCTION Internal control, the strength of every organization, has become of paramount importance today in Nigerian banks. The reason being that the control systems in any organization is a pillar for an efficient accounting system. The need for the internal control systems in the organizations, especially banks, cannot be undermined, due to the fact that the banking sector, which has a crucial role to play in the economic development of a nation is now being characterized by macro economic instability, slow growth in real economic activities, corruption and the risk of fraud. Fraud, which is the major reason for setting up on internal control system, has become a great pain in the neck of many Nigerian bank managers. It has also become an unfortunate staple in Nigeria’s international reputation. Fraud is really eating deep into the Nigerian banking system and that any bank with a weak internal control system, is dangerously exposed to bank fraud. The CBN reported that cases of attempted fraud and forgery in banks, as at half-year 2007 have surpassed what was recorded for the whole year 2006. The CBN half-year report for 2007, revealed a total of 741 cases of attempted fraud and forgery, involving 5.4 billion, $35,406.1, 150 Euros were reported as at June, 2007. In 2006, 1,193 cases were reported involving 4.6 billion, $1.8 million and 14,389.7 pound sterling. The CBN also reported that the backward development was attributable to weaknesses in the internal control...
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...AN ANALYSIS OF THE IMPACT OF RISK EXPOSURE TO THE PERFORMANCE OF BANKS IN NIGERIA CERTIFICATION I certify that this research work was carried out by MR ABOYARIN SALAMI TUNDE with Matriculation No.; 109025160 of the Department of Finance, Faculty of Business Administration, University of Lagos, Akoka, Lagos. __________________________ ______________ DR. LEKAN OBADEMI DATE _______________________ ____________ PROF. W. IYIEGBUNIWE DATE HOD DEPARTMENT OF FINANCE _______________________ ____________ EXTERNAL EXAMINER DATE DEDICATION This project work is dedicated to the Glory of ALMIGHTY ALLAH (SWT) to Him I say as always; ALHAMDULILAHI ROBIL ALAMIN!!! Special dedication also goes to the memory of my late father; Alhaji R.S.A Aboyarin. I pray his soul finds forgiveness and mercy before Allah (Amin. ACKNOWLEDGEMENT CHAPTER ONE 1.0: INTRODUCTION AND BACKGROUND TO THE STUDY Banks are germane to economic development through the financial services they provide. Their intermediation role can be said to be a catalyst for economic growth and development. The efficient and effective performance of the banking industry over time is an index of financial stability in any nation. The extent to which a bank extends credit to the public for productive activities accelerates the pace of a nation’s economic growth and its long-term sustainability. Amongst the...
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...offer. Today, persons, ideas and in fact, doctrines are daily sold to us. Financial services (and intangible product) is one of the important services provided by banks in the economic sub-sector in Nigeria and whose employment of marketing service is becoming more noticeable and acknowledge. The financial services is becoming more noticeable and acknowledge. The financial services sector has in recent years been among the fastest growing areas in the Nigerian economy. Progressive deregulation, starting with free banking ad decentralized foreign exchange market to the lifiting of interest rates ceiling and structural adjustment programme had dramatically altered the operating environment facing suppliers of financial services. These changes in conjunctions with decreases in personal income and wealth, contraction in other sectors of the economy, trends towards globalization and developments in information technology have created an increasingly competitive and demand driven financial sector. As a consequence of these changes, the sector has witnessed considerable innovation not only in terms of products but perhaps more importantly, in terms of processes and marketing arrangement. Initially, the pattern of deregulation probably had its greatest impact in the corporate banking sector and was fuelled by the expanding role of multinational firms. Consequently, many banks, particularly the new generation banks tended to follow their...
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...JOURNAL OF COMPUTER SCIENCE AND ENGINEERING, VOLUME 7, ISSUE 2, JUNE 2011 63 The Impact of Information Technology in Nigeria’s Banking Industry 1 Oluwagbemi Oluwatolani 2Abah Joshua and 3Achimugu Philip Abstract-Today, information technology (IT) has become a key element in economic development and a backbone of knowledgebased economies in terms of operations, quality delivery of services and productivity of services. Therefore, taking advantage of information technologies (IT) is an increasing challenge for developing countries. There is now growing evidence that Knowledgedriven innovation is a decisive factor in the competitiveness of nations, industries, organizations and firms. Organizations like the banking sector have benefited substantially from e-banking, which is one among the IT applications for strengthening the competitiveness. This paper presents the current trend in the application of IT in the banking industries in Nigeria and gives an insight into how quality banking has been enhanced via IT. The paper further reveals that the deployment of IT facilities in the Nigerian Banking industry has brought about fundamental changes in the content and quality of banking business in the country. This analysis and clarification of how Nigerian Banks have used IT to reengineer their operations is detailed through literature review and observation. Three categories of variables that relate to the use and implementation of information technology devices were considered...
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...ultimately put the funds to productive uses. In line with the assumption that banking sector plays an important role in financing the investment projects, successive governments in Nigeria have carried out reforms and institutional innovations in the banking sector. The overall intention of these reforms has been to ensure financial stability so as to influence the growth of the economy and also enhance banks to play a critical role of financial intermediation in Nigeria. However, despite the fact that Nigerian banks have undergone series of restructuring/reforms aimed at strengthening the banks’ ability to efficient service delivery and fund the real sector, problems such as; inefficiency in allocating funds to the real sector, lack of long-dated funding, neglect of the core private sector in terms of credit extension, weak capacity of the banks to fund the real sector, low-level activities of banks, and illiquidity still lingers. This study therefore, examines empirically the impact of financial intermediation on the development of the Nigerian economy with the aim of determining the importance of financial intermediaries and its influence. This study found out that the financial intermediaries (banks) in Nigeria exhibit inefficiency and weak capacity in the allocation of funds to finance the some sectors. On the overall therefore, the study found that the economy Nigeria rely heavily on the banking sector to finance its activities even though the desired expectation is not met...
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...ABSTRACT Electronic banking is a subject receiving great attention in the banking industry and the regulation agencies. It is a driving force that is changing the landscape of the banking industry. It has blurred the boundaries between different financial institutions, enabled new financial, products and services and made existing financial services available in different packages. Some analysis argue that electronic banking is revolutionizing the banking industry, others see it as simply complementing the physical banking branches; irrespective of its own merits there are diverse challenges and problems associated with this form of banking in Nigeria. The main research instruments used are questionnaires and personal interview for staff and customers of various banks, primary and secondary method of data collection were used. The simple frequency percentage was adopted as the statistical measure and hypothesis testing was analyzed using chi-square. In conclusion, the study revealed that electronic banking despite its challenges has led to increased efficiency in banking and its service ,cost-reduction in banks, and reduction of waiting time experience in the banks. The research recommended that banks should follow the stipulated electronic banking guidelines of the central bank of Nigeria. Government should accelerate actions that will enable a good environment and the growth of the banking sector. CHAPTER ONE INTRODUCTION 1.0 BACKGROUND...
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...CHAPTER ONE 1.0 INTRODUCTION 1.1 BACKGROUND OF THE STUDY Electronic banking has long been recognized to play an important role in economic development on the basis of their ability to create liquidity in the economy through financial intermediation between savers and borrowers. It also offers financial services and products that accelerate settlement of transactions and in the process reduce cash intensity in the financial system, encourage banking culture, and catalyses economic growth. However, for the effective functioning of the financial system, the payment systems must be safe and efficient; otherwise they can be a channel for the transmission of disturbances from one part of the economy or financial system to others. This is why central bank have been active in promoting sound and efficient payments system and in seeking the means to reduce risks associated with the system. Nigeria historically operated a cash-driven economy particularly in the consumer sector, however the system has witnessed improvements over the years, and particular in recent times has moved from its rudimentary level of the early years of banking business to the current state of sophistication comparable to other economies at the same level of development. One important reason for financial liberalization and deregulation is the need to develop a good payment system which promotes an appropriate mechanism for efficiency in mobilizing and allocating financial resources in the economy. The payment...
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...THE IMPLICATIONS OF CENTRAL BANK OF NIGERIA (CBN) CASH-LITE POLICY ON FINANCIAL/CORPORATE MANAGEMENT Introduction Owing to the huge cost of cash handling by Deposit Money Banks (DMBs) in the country, the Central Bank of Nigeria introduced Cash-lite policy to drive people towards alternative e-Channels to reduce the handling cost. The policy was introduced last year. It has officially taken off in Lagos with effect from 1st March, 2012 to commence in other states by 1st June, 2012. The Cash-lite policy is aimed at reducing the volume of cash transactions in the Economy through Point of Sales terminals (PoS), web payment, mobile money and Near Field Communications (NFC) transactions. This enables the payment for goods and services via Point of Sales (PoS) without handling cash. The policy stipulates a cumulative daily limit of N150,000 for individual accounts and N1,000,000 for corporate accounts for withdrawal and deposit into a bank account. On exceeding this limit a cash handling cost of N100 for every N1000 (i.e. 10% of the excess amount) is charged. For instance: If you withdraws/deposits N1,000,000 in a day, the initial N150,000 will be processed free but you will be charge 10% handling cost for the excess N850,000, this means you will be paying N85,000 as charges. So, under the cashless policy you will be debited for N1, 085,000 if you withdraw N1, 000,000 and credited for N915, 000 if you deposit N1, 000,000. With the policy, a private/individual account can only...
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