The basic objective underlying this study was the evaluation of
the study of the ability of the New Financial Products by Commercial Banks in
Fund Generalization or Mobilization.This
study has been structured into five chapters to make for easy reading and
comprehension. Chapter one dealt with the background of the prevailing
circumstance in the economy that necessitated the introduction of program
intended to correct the imbalance in the economy. It also gives an insight into
the measure, both monetary and fiscal policies established to build as strong
and viable economic base for the country’s economy. From this, other four
chapters derived that base from the chapter one I order to confirm the
findings, recommendations and conclusions. Though the banks have benefited from
their innovativeness in product, development, certain problems were encountered
by some of this banks which include poor communication system (ie) publicity,
weak data bases, fluctuations in interest rate arising from market forces.
In view of the findings above, recommendations have been made to
help consolidate the banks effort in new product development. However, it would
be not worthy to mention here that the trend in new product development has
been a welcome and rewarding development in the financial sector.
TABLE OF CONTENT
2.01.1 Background of the study
1.2 Statement of the Problems
1.3 Objective of the Study
1.4 Research Questions
1.5 Research Hypothesis
1.6 Significant of the Study
1.7 Scope and Limitations of the study
11.8 Definition of Terms
2.1 Review of Related Literature
2.2 Historical Background of Banks Financial Products
2.3 Innovations in the Nigerian Financial System
2.3.1 Weekend Banking Services
2.3.2 Union Bank Farmers Guide Agricultural Lending
2.3.3 Union Bank Express and VIGO Money Transfer
2.3.4 First Bank Western Union Money Transfer System
2.3.5 First Bank Value Card
2.3.6 UBA Money Gram
2.3.7 UBA Easy Card
2.3.8 UBA Save for School
2.3.9 First education savings scheme
2.4 The Degree of Responsiveness of Depositors of these
2.4.1 Ascertain of the Extent These Financial Products have
Contributed in Profit Generation
2.4.2 Factors Influencing the use of these Financial
2.4.3 Analysis of Prospects OF Existing Instruments and
Possibilities Of Introducing New one in the Market.
3.0 Research Design and Methodology
3.1 Sources of Data
3.2 Method of Investigation
3.4 Methods of Presentation and
3.5 Methods of Presentation of Data
3.6 Techniques of Data Analysis
4.0 Data Presentation of Financial Products
4.1 Design and Features of Financial Products
4.2 Benefits to
4.3 Testing Hypothesis
5.0 Summary, Recommendations and Conclusions
1.1 BACKGROUND OF THE STUDY
The era of oil boom in 1970’s
in Nigeria economy lead to the nations over reliance on oil as its main source
of revenue and there by ignoring other sectors of the economy hence a
mono-product economy. Because of this, most of the industries established
during this period depended on imported components and raw materials for their
operations, and the upsurge in oil revenue during the period in question and
structural distortions, it engendered assumed crisis proportions in 1986
because of the severe decline in crude oil price of that year.
A number of measures were
taken by the various governments to correct the situation, but unfortunately
these measures failed because the country was on mono-product economy where
there are heavy dependence on oil exports and other sectors of the economy were
neglected. It would also be recalled that monetary policies within this period
were designed for short term crises control management, but by 1986 till date,
the situation has been getting out of control which necessitated a long term
crises management of the Structural Adjustment Programme (SAP). The policy was
to facilitate attainment of a lost objectives and to correct various
distortions in the economy, (SAP) sought within a two year-period to correct
the distortation and imbalance inherent in the economy by de-emphasing the
unhealthy reliance of the country economy on oil as its main source of revenue.
The banks were chosen as main
avenue through which the objectives of SAP and second tier foreign exchange
market (SFEM) operation could be met, the effect of this was an unprecedented
growth in the Nigeria financial sector. SAP bough to eliminate all the complex
administrative both necks and this encourages reliance on market force in all
sectors of the national economy.
The financial sector being
very strategic for progress and development was given the latitude and
encouragement to grow. This was aimed at inducing competition so that it’s full
potentials particularly in areas of credit expansion and general overall good
of the economy. Prior to this period, banking institution was characterized by
the arm chair banking and true to their conservative tradition inherited the
clearing banks of London, made modest effort, offered limited traditional
product rate of growth and in order to this, deregulation has changed
permanently the face of the banking industry, and has been characterized by a
number of developments which sparked off stiff competition among banks which
were the principal actors in the foreign exchange market operation made
pretentious profit in their transactions and theirs rose significantly as a
result of the boost in the naira hoping of financial institution when their foreign
balance were converted to naira.
Because of the heavy turnover
in the transactions, the outside investors were motivated into investing in the
industry and there was motivated into investing in the industry and there was
corresponding proliferation of application for banking license, this
subsequently led to the registration of many new banks in the economy which was
a welcome development. With this new development of multiple registrations of
more banks, all those old grant banks that monopolized the business have to be
alert and were ready to scramble for resources that were previously taken for
granted. This lead to constant movements of staff, management and boards, in
and out, new banks opening almost everyday, frequently destabilizing struggles
in board rooms, the potential guidance and frequent change in regulation by the
central Bank of Nigeria.
The general deregulation
permitted banks to do a lot more business and particularly the distraction
between Merchant and commercial Banking became very thin. Other subsequent
issues are the guidelines like the increase in the statutory deposit of banks
(N25 billion recapitalization) at the CBN, rough cash and liquid ratios,
abolition of foreign guarantees as collateral for naira denominated loan,
stabilization securities, increase in capital adequacy ratio and the prevention
guidelines went further to aggravation and the cash squeeze thereby tightening
the already stiff competition.
In addition to the
competition between Banks and individual, the industry as a whole has been
competing with non-Banks financial institutions have now become similar to
those provided by commercial Banks. As a result of the competitive environment,
Banks have been scrambling for deposits, which formed the main raw materials
for their operations.
Banks traditionally perform
the function of intermediary between savers and investors, the mobilize
depositors from the surplus sector which is made up of those with many
investment projects requiring more funds than they have. They also act as
catalyst in capital formation which is regarded as the major policy governing
the rate of economic growth and self reliance. In addition they occupy a prime
and sensitive position in accelerating the development of other units in the
The resultant effect of
licensing more Bank, monetary measures and deregulation in that the Banks are
forced out to look for other avenue for deposit hence the craving to introduce
new financial products to win more client and increased deposit base to enable
them survive the rest of time. The growth in the number of financial products being
offered by banks has been of the most striking development in the industry over
the years and which has been associated with deregulation of the system in the
wake of SAP.
The number of such products
has grown to a far reaching competitive level and many more products are still
to come, the ones in circulation now includes, weekend services , farmers guide
to agricultural lending vigor, money transfer, western union money transfer,
value card, smart card, UBA save for school, UBA money gram, Diamond paycard.
All these products have been introduced as a result of the increased
competition within the environment to enable the commercial Banks survive the
1.2STATEMENT OF PROBLEM
The environment in which the
commercial Banks operate has been the direct result of the financial sector
explosion in the number of commercial Banks and the deregulation of the
financial sector of the Nigerian economy. There is keen competition among Banks
and non-Bank financial institution, it is now the survival of the fittest.
There is more scrambles for deposit now than before, since deposits form the
major raw materials for their operation.
A good number of new
financial products have been introduced since 1988 till date in the Banking
industry for the fear of losing their deposits to some fraudstars that find
their way into the industry. The banks have to wake up from their slumber by
mapping out measure to enable them stand the test of time. It would be
necessary here to lift a few of the regulatory measures that have shaped the
industry and lengthened competitive stake they included the series of direct
measures applied by the CBN to mop up excess liquidity, sectoral credit
allocation guidelines, interest payment on current accounts, allocation of
There was of course the large
number of commercial Banks and financial institutions in the country of which
each should distinguish herself from others to plan for this, the first was to
accept that the business environment changed and would continue to change with
the century and only the institutions that are able and willing to make tough
decisions and sacrifices necessary thing to become flexible, efficient and productive
would survive. Another development that increased competition was the widening
of the sphere within which Banks could operate. The general deregulation
permitted banks to do a lot of more business, and particularly by the
distinction between merchant and commercial Banking became very thin. Other
subsequent issues at the guideline like the increase in the statutory deposits
of banks to the CBN, high cash and liquidity ratio absolution of foreign
guarantees as collateral for naira denominated loans, stabilization securities,
increase in capital adequacy ratio and the prudential guideline went further to
aggravate the cash squeeze thereby tightening the already stiff competition.
In addition to the
competition between Banks, individuals, the industry as a whole has been
competing with non-Bank financial intermediacies (NBFI) with this development,
the service provided by non-Bank financial institution have now become similar
to those provided by commercial Banks. As a result of the competitive environment,
Banks have been scrambling for deposits which formed the main raw material for
Banks traditionally perform
the function of an intermediary between savers and investor, they mobilize
deposit from the surplus sector which is made up of those with many investment
projects requiring more funds than they have. They also act as a catalyst in
capital formation which is regarded as the major fact governing the rate of
economic growth and self reliance. In addition, they occupy a primed sensitive
position in accelerating the development of other units in the system by
Nigeria Banks into the money market.
The problem is evaluated to
whether these new financial products have effectively mobilized deposits for
Banks and at the same time benefited the depositors. This work is aimed at
finding the right answers to the questions raised above.
1.3OBJECTIVE OF THE STUDY
identify the various types of new financial products of the commercial Banks.
determine the degree of responsiveness of the depositors of these products.
ascertain the extent these financial products have been contributing to profit
generation of banks.
identify the factors influencing the use of these new products.
analyze the prospects of existing instruments and the possibility of
introducing new ones in the market.
recommendations which may assist commercial banks is solving the problems
militating against the development of these new financial products.
are the various types of new financial products of the commercial Banks?
is the degree of responsiveness of depositors towards these products?
what extent have theses financial products contributed to the profit generation
are the factors influencing the use of these new products?
are the prospects of existing instruments and the possibility of introducing
new ones in the market?
are the recommendations which may assist commercial banks in solving the
problems militating against the development of these new financial products?
There is no significant degree of responsiveness
of the customers to these products.
Hi: There is significant degree
or responsiveness of
the depositors to these products.
Financial products have not been contributed to
the profit generation of Banks to a significant extent.
Hi: Theses financial products
have contributed to
the profit generation of banks to a significant extent.
Poor communication is a factor influencing the
use of these new products.
Hi: Poor communication is not a
the use of these new products.
1.6SIGNIFICANCE OF THE STUDY
The study is significant for
the fact that many products have been introduced and more are scheduled to hit
the market as government progress on its efforts to bring sanity and restore
confidence in the Banking industry (lost confidence) by the depositor.
It is of great importance to
the operations in the banking industry in that it would enables them assess the
degree of the success of their newly developed products and be able to identify
unprofitable ones and phase them out of the market, redesign them for greater
impact or concentrate effect on effective productions, it will also serve as a
first information of new comers in the Banking industry and those intending to
develop some, in determining their targets in financial products development.
Against it will be beneficial to students in banking and finance and
researchers who may be interested in the area of this study.
1.7DEFINITION OF TERMS
(1)Profitability:- This requires that assets must be deployed in
a manner as to yield greatest returns. To achieve this objective, all assets of
the bank should be deployed only where they earn the greatest interest.
(2)Prudential Guideline: These are some of the monetary measures
introduced by the CBN to inject sanity in Banking operations and performance
reporting system. Basically, the prudential guidelines require all banks to
categorize their loan portfolio into performing and non-performing proving
(3)Fraudsters:- Fraud in banking industry is defined as a
conscious or deliberate effort aimed at obtaining an unlawful financial
advantage at the detriment of another person who is the rightful owner of the
fund (Orji 1998) while the fraudster is the person who specializes in deceiving
and obtaining by tricks of which is the banking industry. The whole problem
boils down on the depositors in the bank.
This requires that a bank should be able to pay cash immediately when called
upon to do so for all its demand liabilities.
(5)CorporateProfits:- This means organizational
performance translated into monetary terms. In other words it is the net profit
(6)FinancialProducts:- These are products
(innovation) introduced to support transactions in the financial market thereby
increasing their level of activities. Some of the products are western money
union transfer, UBA money gram, smart card etc.
(7)New Financial Product:- These are current products introduced
recently in the banking industries to enhance their operational level.
TERMS AND CONDITIONS APPLY
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