AN APPRAISAL OF THE REFORMS IN THE BANKING SECTOR AND IT’S IMPACT ON NIGERIA ECONOMY ( A CASE STUDY OF SELECTED BANKS IN ANAMBRA STATE.
This research was basically undertaken in order to appraise the reforms in the banking sector and its impacts on the Nigerian economy. The current reform in the banking sector is generally part of the broader on-going national economic reforms. Reform policy as an instrument of strengthening the banking sector was undertaken to ascertain the level of impacts on the Nigeria economy data TO PLACE AN ORDER FOR THE COMPLETE PROJECT MATERIAL, pay N3, 000 to: BANK NAME: FIRST BANK ACCOUNT NAME: OKEKE CHARLES OBINNA ACCOUNT NUMBER: 3108050531 After payment, text the name of the project, email address and your
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After payment, text the name of the project, email address and your names to 08064502337subsequently collected and analysed mainly revealed that the reforms represent one of the most significant development in the banking sector and this trend will undoubtedly lead to a continuous reduction in the number of banks. The reform policy would continue to encourage merger and acquisition that would result in the emergence of mega banks with a pool of resources and increased network of branches. The need for an adequate capitalization of the Nigerian banks beget the reform and consolidation exercise. The aftermath effect is enormous and has set the banking sector on a rocky financial footing in preparation for effective migration and participation in the global financial marketplace. It therefore concluded that with this new reform, banks will begin to look at further policy reforms as opportunity to emerge as mega banks with high capitalization to effectively migrate into and participate in eh global financial market place.
1.1 BACKGROUND OF THE STUDY
Reforms have been regular features of the Nigeria a banking system. They have been introduced in response to the challenges posed by developments within the economy and international financial system.
The earlier banking sector reforms came by way of legislations intended to strengthen the banking regulatory frame work. The first was the banking or finance of 1952 enacted to stop the banking sector distress arising from the uncontrolled establishment of indigenous banks and the consequent collapse of twenty two of the twenty-five indigenous banks established between 1927 and 1951. The other legislator includes: 1958.
- The central bank of Nigerian act 1958
- The banking act of 1969
- Nigeria deposit insurance corporation act of 1988.
- The CBN Act of 1991 which amended and repeated the CBN Act of 1958.
- The bank and other financial institutions Act of 1991, which was also amended and repeated the banking Act of 1969.
It is important to note that through these legislations resulted in a considerable strengthening of the banking system they did not succeed in completely preventing the cycles of boom and burst in the sector. A case point was the banking system distress of the late 1980’s and early 1990s.
This systematic distress resulted from the rapid expansion of the banking system by way of the establishment of many commercial and merchant banks in the wake of introduction of the structural adjustment programme (SAP).
The current reforms on the banking sector are part of the broader on-going national economic reforms. On Tuesday July 6, 2004 at a special session of the bankers committee in Abuja, the Governor of the central bank of Nigeria professor Charles Soludo, Unveiled a thirteen (13) point reform agenda to bank chiefs, which include an upward review of banks capital bases from 2 million to 25 billion.
In view of the need for recapitalization professor Charles Soludo poined that banks have not played their expected role in the development of the economy because of their weak capital base and as such, the decision to raise the capital base of banks was with the aim of strengthening and consolidation of the banking system. He further explain the strengthening and consolidation of the banking system was phase of reforms designed to ensure a diversified strong and reliable banking sector, which will ensure the safety of depositors money, play active development roles in the Nigeria economy and also become competent and competitive in the regional and global financial system.
Besides strengthening the Nigeria banks, the new capital professor Charles Soludo explained in intended to stop the system distress that has continued to rock the system. According to him, if we do any thing today, several banks would go under and we will end up with more job losses, but with this measures, we will end up with more job savings than if we allowed banks to go under, speaking further he said, we have a duty to be proactive and to strategically position Nigeria banks to be active players not spectators in the emerging world adding that the inability of the Nigeria banking system to be voluntarily on consolidation in line with the global trend had necessitated the need to consider the adoption of appropriate package to facilitate merger and acquisition in the country as well as crisis resolution option and to promote the soundness, stability and enhanced efficiency of the system.
The central bank of Nigerian new policy was undoubtedly a bitter pill for any banks to swallow and in no time heated debates both within and outside the financial circles began to surface over the appropriateness of the policy in relation to Nigeria banks and the current state of the economy. One of such instance was from the bankers themselves who in a swift reaction to the central bank of Nigeria’s re-capitalization directive constituted a ten (10) man panel on July 9, 2005 to examine the new directives and provide an industry position for onward presentation to the presidency, national assembly and the central bank of Nigeria. The panel which was headed by the president for the chartered institute of bankers of Nigeria (CIBN), Samuel Kolawole, subsequently, came up with its own submission in a 19 page document “Recapitalization of the banks to 25 billion banking industry’s position paper” despite the life and cry from certain dissenting quarter, the CBN perform directive was not without its own fair share of supporters which include president Olusegun Obasanjo, who publicly supported the 25 billion capital base for banks, the manufactures association of Nigeria (MAN) who endorsed the policy, saying it would broaden the nation’s economic base and help to position the real sector.
Another view expressed by the president of the institute of Chartered accountant of Nigeria (ICAN) Mrs. Ibronke Osiyemi said “the 25 billion re-capitalization of banks and other CBN reform initiatives would encourage co-operation among bank, institute corporate governance and discourage one man bank ownership.
By the first week of May 2005, the fifty –five (55) of the nation banks had coalesced into fifteen (15) distinct groups with thirteen (13) banks (some of which had already met the 25 billion capital base) opting to stand alone while twenty (20) banks were yet to make consolidation plans.
The announcement of the successful 25 banks that achieved the recapitalization requirement (on January 8, 2006, 9.30 pm) are Diamond bank, Oceanic bank, access bank, Afri bank, Eco bank, equitoral trust bank, standard Chartered bank, UBA, First bank, first city monument bank, Fidelity bank, Zenith bank, wema bank, sterling bank, Citizen bank, first Inland bank, North Omega bank, Union bank, Skye bank for Africa, IBTC Chartered bank, Guaranty trust bank, Dev Com ETB bank, Platinum bank. But some of these banks have gone down or merger with strong bank due to the non-performing loan which they gave out without no strong collateral on them.
This study will focus on an appraisal of the reforms in the banking sector and its impacts on the Nigeria economy. The study is based on lending banks in Nigeria.
1.2 STATEMENT OF THE PROBLEM
Assessing the reforms in the banking sector and its impacts on the Nigeria economy. Three factor are expected to be noted.
- The performance of the banking sector to compare foreign banks.
- Efficiency to customers satisfaction
- Improve profitability via growth in share holders funds.
Improve in the competitive nature of banks put the country banking industry at a very intuitive position to compete with foreign banks, satisfaction explain the real efficiencies rendered by the banking industry, it is effective through the process of reform.
Improvement in the profitability and growths in shareholders fund has put in the problem of security in order, thereby shares holders will increase their shares by re-investment.
This research therefore is borne out of a desire to find out the likely reforms in the banking sector and it impacts on Nigeria economy items of their performance.
1.3 OBJECTIVE OF THE STUDY
The objective of this research are as follows:
- To appraise the reforms in the banking sector
- To assess the impact of the reforms on the Nigerian economy.
- To identify theproblems confronting the banking industry
- To offer solutions to the problems identified
1.4 SIGNIFICANCE OF THE STUDY
It is expected that the study will:
- Enrich the liter active of reform and its impacts on the Nigeria economy?
- Present an adequate classification of the scope of the consolidation.
- Evaluate the problems facing and proffering useful solution in the banking industry.
- Satisfy the researchers curiosity as to the reason behind the reform and consolidation.
- Saving as basis for further research the area of the reform policy.
1.5 RESEARCH QUESTIONS
The following are the research questions.
- What are the main ingredients in the banking reforms?
- What is the impact of the banking reforms on Nigerian economy?
- What are the problems confronting the banking industry.
- How can the problems be solved?
- SCOPE OF THE STUDY
The research focuses on the banking sector of the economy with emphasis on some banks in the country. This derives basically from the strong financial power and the nature of its operation.
This research shall not only concern on the reform, it shall also look at the activities of the banks on consolidation and implementation of the reforms.
1.7 DEFINITION OF TERMS
For easy understanding of the research project, the following key have been defined as they are used in the study in order to eliminate possible confusion.
Reform: This refers to an improvement in an
organization by making change to it by laws.
Recapitalization: This refers to the financing of
Consolidation: This refers to the process of
making a position of power or success stronger so that the parties involve can achieve greater efficiency.
Equity: Is the value of the shares issued by a
company, which is the property of its ordinary shareholders. They are also stocks and shares that carry no fixed interest.
Central Bank of Nigeria (CBN): Is the apex
institution which controls, regulate and supervises the monetary and credit system of the country.
Capital base: Is the sum amount which the money
deposit banks have or deposited with the central bank.
Bank: An organization that provide various
financial services for example keeping and lending money.
Merger: Is the coming together of two or more
companies of roughly equal size, pooling their resources into a single unit or business.
Acquisition: Is the takeover of the ownership of
and management control of company by another.
1.8 FIRST BANK OF NIGERIA PLC
First bank of Nigeria Plc (First bank) was established since 1894, has solidified itself as a brand of fortitude , strength and innovation in the Nigerian financial sector since its inception. The iconic African elephant with navy blue and ivory colours had been a national symbol of one of the biggest international players in the financial services industry to date.
First bank has been through many seasons Since 1894,
- From being the only bank in Nigeria for decades.
- Weathered the “banking explosion” of the 1930s to 1950s.
- Followed by an era of government ownership and control.
- To a flurry of consolidations and then gradual growth in number of banks up to the early 1980s.
- Then yet another industry growth spurt in the early 1990s when the banking sector was deregulated.
- Leading to an industry shake-up in the late 1990s, which reduced the number of banks from 126 to 77.
- And later resuscitation and growth to 89 banks.
- Leading to the recent shake-up to 25 banks
All through the seasons first bank has remained resilient, dependably, dynamic and “truly the first”
1.8 ACCESS BANK PLC
Access bank Plc is a remarkable story of the transformation of a small obscure Nigerian bank into African financial institution of note with emerging footprints on the international banking landscape. Access bank today is one of the top 10 largest banks in Nigeria in terms of asset base. A phenomenal accomplishment considering its antecedents.
The beginning (1988-2002)
- December 19, 1988: Access bank was issued a banking license.
- February 8, 1989: Access bank incorporated as a privately owned commercial bank.
- May 11, 1989: Access bank commences operations at its Burma road, Apapa Head office.
- May 24, 1998: Access bank become a public limited liability company.
- November 18, 1998: access bank listed on the Nigeria stock exchange.
- February 5, 2001: Access bank obtained a universal banking license from the central bank of Nigeria.
The board of directors appointed Aigboje Aigimoukhuede ad MD/CEO and Herbert wigwe as deputy managing director. The mandate was clear “reposition the bank to one of Nigeria’s leading financial institutions within a five year period (March 2002-March 2007)”. This task was perceived by many as audacious given the realities of the bank at the time.
Also appointed to the board was Mr. Gbenga Oyetode who brought commendable board experience gathered from some of Nigeria’s leading companies such as MTN Nigeria, Okomu oil Palm Plc. The new management then articulated a transformation agenda for access bank Plc.
This agenda represented a complete departure from all that characterized the bank in the past and became the road map for the transformation of the bank into a world class financial institutions.
The focus was to
- Assemble a credible and high caliber management team.
- Introduce a culture of excellence founded on professionalism and integrity.
- Instill a passion for customers in all members of staff.
- Establish a low cost liability generation strategy.
- Expand branch network to cover all clearing zones within Nigeria.
- Create a world class brand image.
- Ensure human capital development
- Enlarge shareholder base.
- Introduce strong procedures and processes to drive day to day activities of eh bank.
————- this is an incomplete article ———– it’s a product of a high quality project researched work.
Project topic: AN APPRAISAL OF THE REFORMS IN THE BANKING SECTOR AND IT’S IMPACT ON NIGERIA ECONOMY ( A CASE STUDY OF SELECTED BANKS IN ANAMBRA STATE.
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