ABSTRACT
This study investigated the staff perception of the impact of the N25
billion minimum capital base on Nigerian banking system using case study of
some selected banks namely; First Bank of Nigeria Plc, Union Bank of Nigeria
Plc and United Bank for Africa Plc. The research was geared towards finding
both the positive and negative impacts of the N25 minimum capital base
on Nigerian banking system, the impacts of the N25 billion minimum
capital base on bank workers/bankers e.t.c. To achieve this, relevant
literatures were reviewed. Also using the selected banks, the researcher employed
both primary and secondary sources of data collection for the analysis. The
primary sources of data collection employed include questionnaires, oral
interview and observations while the secondary sources of data collection
employed include textbooks, newspapers, journals and seminar papers.
Statistical tools like tabulations and Chi-square were used to analyze the data
collected. From the analysis done, the following findings were made; the N25b
minimum capital base has significant impacts on the Nigerian banking system,
the N25b minimum capital base has not significantly improved the
competitive efficiency of the Nigerian banks, the N25b minimum capital
base has not led to retrenchment of many bankers and N25b minimum
capital base has led to mergers and acquisition within the banking industry
which may of course lead to more strong and reliable but few banks. The study
equally concluded that the exercise posed some problems on the regulatory
authorities. Finally, the researcher recommended that; the banks’ capital base
should be stratified into investment and universal bank categories with each
having a capital base according to the services it renders and its risk
profile, necessary policy framework should be established to improve on the
quality of bank management and the general security network.
CHAPTER
ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
Banking institutions occupy a central position in the financial system
of any nation and are essential agents in the development process of market
economies. They are particularly relied on for the promotion of financial
integration of the various parts of a country; bringing about improvement in
the mobilization and utilization of funds for increased capital formation. It
is obvious that banks must be viable and healthy and its stability and
soundness provided for.
Based on this, the industry is usually heavily supervised and regulated
by government or her agencies. The soundness and stability of the banking
industry promote public confidence and provides liquidity and safety of
shareholders funds. This is one of the reasons why government or her agencies demand
reforms of the industry.
On this ground, the Nigerian Banking Industry had undergone remarkable
changes over the years, in terms of the number of institutions, ownership
structure as well as depth and breadth of operations. The industry has been witnessing
prudential regulation and control in an attempt to address the backdrop of
banking crisis due to highly under-capitalization, deposit taking banks,
weakness in the regulatory and supervisory framework; weak management practices, and the tolerance of deficiencies in the corporate
government behaviour of banks. Banking crisis usually starts with inability of
the bank to meet its financial obligations to its stakeholder. This, in most
cases, precipitates ruins on banks, the banks and their customers engages in
massive credit recalls and withdrawals, which sometimes necessitate Central
Bank liquidity support to the affected banks.
In respect of this, at the 273rd meeting of the Nigerian
Bankers’ Committee held at the Central Bank of Nigeria’s headquarters in Abuja
on July 6th 2004, the then newly appointed governor of the Central
Bank, Charles Soludo in his maiden address, announced a 13 – point reform
program for the Nigerian Banks. Among these reforms, is the requirement of
Nigerian Commercial Banks to shore up their minimum capital base to N25
billion (through injection of fresh capital and/or mergers & acquisition)
each with full compliance as at 31st December, 2005.
The primary objective of the reforms is to guarantee, an efficient and
sound financial system. They are designed to enable the banking system develop
the required flexibility to support the economic development of the nation by
efficiently performing inter-mediation (Lemo, 2005). Thus, the reforms were to
ensure a diversified, strong and reliable banking industry where there is
safety of depositors’ money and position banks to play active developmental
roles in the Nigerian economy.
Capitalization is an important component of reforms in the Nigerian
banking industry owing to the fact that a bank with a strong capital base has
the ability to absolve losses arising from non-performing liabilities. It
resulted from deliberate policy response to correct perceived or impending
banking sector crises and subsequent failures.
According to Soludo (2004), the banks have not played the expected role
in the development of the economy because of weak capital base and as such, the
decision to raise the capital base of banks was with the aim of strengthening
and consolidating the banking system. He further explained that the
“strengthening and consolidation of the banking system will constitute the
first phase of reforms designed to ensure a diversified, strong and reliable
banking sector that will ensure the safety of depositors’ money, play active
development roles in the Nigerian economy, and be competent and competitive
players in the regional and global financial system. The goal of the reform is
to help banks become stronger players, and in a manner that will ensure
longitivity and hence higher returns to shareholders over the time and greater
impacts on the Nigerian economy. We strongly believe that the ultimate
beneficiaries of the policy shift would be; the ordinary men and women who can
put their deposits in the banks and have a restful sleep, the entrepreneurial
Nigerians who can now have a strong financial system to finance their
businesses, and the Nigerian economy which will benefit from internationally connected and
competitive banks that would also mobilize international capital for Nigerian
development”. Besides, it will stem the systemic distress that has continued to
rock the system.
The call for recapitalization in the banking industry raised much
argument among the bank regulators, promoters and depositors as if shoring up
of bank’s capital base is a new phenomenon in Nigeria. The Banking ordinance of
1952 prescribed an operating licence and emphasized on minimum equity capital
for all banks (Onoh, 2002: 321). Since then, raising of bank capital base has
become the hallmark response policy of the Nigerian Monetary Authorities......
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Item Type: Project Material | Attribute: 92 pages | Chapters: 1-5
Format: MS Word | Price: N3,000 | Delivery: Within 30Mins.
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