guidelines for licensed banks which are based on globa banking standards,
imposed far-reaching requirements in the classification of risk assets and
provision for bad and doubtful debts. Since its introduction in November 1990
the implementation of the guidelines has had a profound impact on the
operations of banks.
In this project, the researcher has succeeded in identifying the features of
the prudential guidelines as well as its impact on published financial
statements of commercial banks in Nigeria.
Published financial statement of the banks for the period of 1990 that is, the
inception of prudential guidelines were examined and with that of the period
1994-1998 the prudential guidelines period.
Both primary and secondary sources of data were used in the course of the
hypothesis were tested using chi-square test.
research work revealed that:-
(1) The net profit position of commercial banks in
Nigeria have been significantly altered since the implementation of the
(2) The provision for bad and doubtful debts of
commercial banks in Nigeria have significantly increased since the
implementation of the prudential guidelines.
exercise was concluded with suggestion for further study which include:-
(1) further research be conducted to ascertain the
impact of the prudential guidelines on the overall activities of all licensed
banks in Nigeria.
(2) Further research be carried out on the central
bank of Nigeria monitoring implementation measures concerning banks and
non-banks financial institutions in Nigeria.
TABLE OF CONTENTS
Statement of problem and objective of
Rationale of the
Significance of the
3.2 Methodology of
3.3 Limitation of
3.4 Sources of
Discussion of the result of
Summary of the study
OF THE PROBLEM
introduction of the prudential guidelines, according to CBN circular (1990)
some banks were used to declaring huge but unrealized profit, otherwise
referred to as “paper profit”.
The following problems will be investigated in this study:
(a) Did profit figures of the selected commercial
banks decrease significantly post prudential guidelines?
(b) Did provision for bad and doubtful debts
increase significantly under prudential guidelines?
1.2 RATIONAL OF THE STUDY
According to Olufun (1991) prudential guidelines seeks to infuse sanity into
the chaotic banking industry.
introduction of the guidelines most banks were used to declaring what is known
as “paper profit “ and off – balance sheet, engagement ceased to form part of
the majority commercial banks balance sheet totals. The guide line will assist
banks in improving the assessment of their credit performance as well as
providing banks supervisors and auditors with enhanced assessment criteria for
adequate capital provision for the protection of the banks. Strict observation
of prudential rules by banks contribute towards the efficiency of monetary
OF THE STUDY
Obviously some literature exists on the effects of the CBN 1990 prudential
guide lines on the financial statement.
the need to up-data such information exists and cannot be over emphasized.
Therefore this research was undertaken in other to contribute to the existing
literature by up-data it as much as possible.
The major significance of this study is aimed at educating the readers on the
impact of the CBN guidelines on the financial statement. It was intended to
ensure prudence in credit portfolio classification, provisioning for
no-performing facilities. It was necessary to have such prudence to ensure
reliability in published accounting information and operating results by
financial institutions plus some measures of uniformity in credit portfolio
disclosures and interest accruals. According to Eghodaghe (1993) it will help
the monetary authorities to know how far the guidelines have achieved it’s
primary objective reduction in the declaration of paper profits by banks.
This study will assist the commercial bank in coming up with strategies that
will enhance their credit portfolio and reduce loan losses and subsequent
provision for bad and doubtful debts. Finally it will provide a good reading
material for students of banking and finance, management, practicing bankers
including other related professionals and will expose other possible areas of
1.4 DEFINITION OF TERMS
F B N:
First Bank Of Nigeria PLC
U B N:
Union Bank of Nigeria PLC
C B N:
Central Bank of Nigeria.
According to Odoh (1998) is a list of securities held by and investor. A good
portfolio will show a wide spread of investment in order to reduce the risk of
DOUBTFUL DEBTS:- It is referred to all non performing credit facilities to
reflect such specification in the central bank prudential guidelines.
Monetary Policy:- A policy which deals
with discretionary controls of money supply by monetary authorities (Orji 1998).
GUIDELINES: According to Nwankwo (1991).
guidelines is a body of specific rules or agreed behaviour either imposed by
some government or external agency that controls the activities and business of
operation of the institutions.
ASSETS: These are those credit on which payment of both principal and interest
are up to data in accordance with the agreed repayment terms. (Nigeria
Accounting standard Board 1990).
ASSETS:- Credits on which payment of both principal and interest are up to date
in accordance with the agreed repayment term.
STATEMANT:- According to Nigeria Accounting standard Board (1984) is a report
which consist of Balance sheet, profit and loss account or income statement,
the notes of the account, source and application of funds statement, value
added statement and historical financial summary.
PROFIT :- False profit declaration.
TERMS AND CONDITIONS APPLY
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