ABSTRACT
The resultant impact of financial
liberalization opened up the Nigerian economy to global financial markets,
which has generated increasing apprehension in the economy and has exposed the
fragility and vulnerability of the financial system. It is therefore imperative
for the central Bank of Nigeria to introduce measures that will reduce the
exposure and enhance the stability of small business in the nation’s financial
system. A defensive measure that will strengthen the existing banks and still
provide small businesses with financial facilities and services is what is
really needed. This study investigated the impact of previous recapitalization
in the banking system on the performance of some selected small businesses in
the country with the aim of finding out if the recapitalization is of any
benefit. The study employed both primary and secondary data obtained from
responses gotten from banks, investors, government public, and customers. The
data were analyzed using both descriptive e.g. means and standard deviations
and analytical techniques. It was found that the mean of key profitability
ratio such as the yield on earning asset, Return on equity and Return on Asset
were significant meaning that there is statistical difference between the mean
of the bank before 2001 recapitalization and after 2001 recapitalization.The
study recommends that the banks should improve on their total assets turnover
and to diversify their funds in such a way that the can generated more income
on their assets, so as to improve their return on equity. As a result of the
findings, recommendations were made and some of them are: Recapitalization
should be sustained until Nigerian banks are among the first 100 banks in the
world. Standard regulations should be enacted in order to control banks
services to prevent exploitation tendencies various types of competitions
should be stimulated thereby pushing Nigerian banks towards global trends.
CHAPTER ONE
INTRODUCTION
1.1 Background of the study
Over the years, the Nigerian
economy is faced with national and global economic challenges and as such, the
financial institutions, especially the banking sector has an option of
sanitizing and restructuring its operational processes in order to survive the
depressed economy, as well as embarking on a consolidation exercise which would
have some wider structural effects on the industry and on the economy as a
whole. Uboh (2005) set the pace for the landslide of other works on the
interdependent and the relationship between banks and economic growth. Also,
Imala (2005) posited that the objectives of banking system are to ensure pure
stability and facilitate sustained rapid economic development.
Basically, banking is a service
industry operated by human beings for the benefit of the general public while
making returns to the shareholders. As such, it is natural that the services
provided thereof by the industry cannot be 100% efficient; however, there is
always a room for improvement. The banking sector in the third world economies
has been grossly under managed when compared with their counterparts in the
developed countries of the world. This has made it imperative for Nigerian
banks to sanitize and restructure their operational processes so as to be in line
with the global trends, and to survive the depressed economy. Thus, this has
led to the recapitalization of banks.
The
managers, because of the pressure to provide banking services, had little time
to market their bank services or design new products to improve their
customers’ service and at the same time, they received changes based on the
approved tariff. Competition was minimal and customers could spend long hours
trying to obtain service in the banking hall due to long queues.
Prior to the 2004/2005
recapitalisation exercise, the Nigerian banking sector was highly oligopolistic
with remarkable features of market concentration and leadership. Under the recapitalization
and consolidation exercise in the industry, each licensed bank was expected to
meet up with the new minimum capitalization requirement of =N=25 billion on a
solo-basis or achieve that either through merger with others or acquisition of
others. The banks were encouraged to enter into merger/acquisition arrangements
with other relatively smaller banks thus taking the advantage of economies of
scale to reduce cost of doing business and enhance their competitiveness
locally and internationally.
According to the former
governor of the Central Bank of Nigeria (CBN), Prof. Charles Soludo,
recapitalisation of the Nigerian Banking Sector was necessitated by the high
concentration of the sector by small banks with capitalization of less than $10
million, each with expensive headquarters, separate investment in software and
hardware, heavy fixed costs and operating expenses, and with bunching of
branches in few commercial centers - leading to very high average cost for the
industry (Soludo, 2004). The fragile state of the Nigerian Banking Sector in
the pre- recapitalization exercise is so bad that, only ten banks (10) out of
the eight-nine (89) in operation accounted for 51.9% of total assets, 55.4% of
total deposit liabilities, and 42.8% of total credit (CBN, 2004). The rating of
the licensed banks in operation, using the CAMEL parameters, revealed that ten....
================================================================
Item Type: Postgraduate Material | Attribute: 66 pages | Chapters: 1-5
Format: MS Word | Price: N3,000 | Delivery: Within 30Mins.
================================================================
No comments:
Post a Comment