ABSTRACT
This project gives a
description of the practical knowledge and working experience acquired by me,
during my staying in school, and some research made so far.
In that case, I started
this project with a brief description of the introduction/background, statement
of problems, and objectives of the study and its significance etc.
Furthermore, my special
achievement is that I gained some practical experience that can help and
forward work in any bank. The project covered for the 2 years duration of
my course in Ordinary National Diploma (OND) in Business Administration and
Management dealt more on the effect of distress in commercial banks which
comprises of 1,2, and 3.
TABLE OF CONTENTS
CHAPTER ONE
1.1 INTRODUCTION
1.2
Background of the subject matter
1.2
Problem associated with the subject matter
1.3
Problems that the study will be concerned with
1.4
The importance of study
1.5
Definition of important terms
1.6
Reference
CHAPTER TWO
2.0
Literature review
2.1
The origin of the subject area
2.2
Schools of thought within the subject area
2.3
The school of thought relevant to the subject matter
2.4
Different methods of studying the problem
2.5
Summary
References
CHAPTER THREE
3.0
Conclusion
3.1
Data presentation
3.2
Analysis of the data
3.3
Recommendation
3.4
Conclusions
References
CHAPTER
ONE
1.1 INTRODUCTION
Given the events of the
past and the anxieties being experienced by most people in the society as to
likely effects of renewed regulation within the banking industry, especially in
relation to interest rate, I consider the topic “A strategy for avoidance of
distress in Nigerian commercial banks” to be really current.
The distress which
reared its head in the banks on the early minutes, has no doubt had negative
impact on the sector for one, banks are no longer regarded as the most sacred
institution. Trust and confidence – the basic attributes that sustains
management and customers relationship have disappeared the implication that
less Nigerian today’s belief that banks still remain that safe vault for money
and valuables.
These phenomenal changes
brought by the distress – paved way for the collapse of many banks. The
failed banks at present cannot meet their obligation owed to both new sector,
indicate that N47.9 million, representing about 25% of the entire banking
deposits was lost through the financially distressed banks.
Yet banks play vital
role in the development of the economy. It is the pivot of sectional
advancement through the provision of loan and credit facilities for
investment. Essentially the intermediation between savers and investors,
and mobilization and centralization of the scattered ideal funds of workers
etc. for investors to borrow for their operation, constitute the major plan for
sustainable banking development and culture.
It is not surprising
that the current distress has seriously eroded the confidence of an average
depositor on banks. Against this background bankers are eager to utilize
every forum to discuss the operations in the sector, the way of improving their
services and restoring the sector to its traditional position and role.
1.2
BACKGROUND OF THE STUDY
Financial distress in
the Nigerian financial system is problem that has of recent assumed in intractable
dimension. The situation is such that the regulatory authorities appear
to be fighting a losing battle in their bid to sanitize the system. The
study becomes more imperative when we realize the important role such
institution play in an economy, and on economy can survive nor progress without
a sound and dependable banking system.
In any economy,
commercial banks serve as vehicle through which credits are transferred from
the surplus to the deficit sectors. They finance both private and public
sector investments. Essentially, banks are financial intermediaries,
collecting savings of people who have more money than they can immediately
require and lending such money to people who require more money than they can.
They can immediately
generate thus matching the savings requirement of depositors with the
investments requirements of borrowers. Even though this is the primary
thrust of banks. The passage of time and development of commerce have
given way to other services and the function of banks to day could be grouped
as follows:
i) Deposit
collection:
Current account fixed, short-term deposit, saving account, night safe etc.
ii) Money
transmission services: Cheques card, cash card,
gift cheque, credit card, credit transfer, direct debit, standing order, bank
draft, certified cheques, mail transfer, telegraphy transfer etc.
iii) Financial
general services: Tax
administration unit trust, stock exchange services, investment advice, status
enquirer, safe-custody services etc.
iv) Foreign
services: Travelers cheques, foreign currency, foreign draft, mail
transfer, telegraphic transfer, letter of credit, bills collection and
settlement etc.
The first and paramount
concern of any bank, especially commercial banks, is the need to mobilize
deposit, which constitute the vast pool of laonable funds from which the
lending business of the bank can be conducted.
This deposit generation ability will depend among other things, on what has now
been popularly adopted as the three C’s of banking.
Confidence Convenience,
and Cost
Confidence, refers to
the people’s faith in the i.e. the extent to which people generally believe
that their money is safe and that the possibility of loss remote. This is
in fact synonymous with the overall rating of the bank in the market.
Convenience refers to
the case with which business could be transacted, the rigours of formalities,
waiting time, the environment within the banking hall etc. while cost refers to
what customers pays to enjoy banks services.
The business of banking is very intricate, in that money is the main commodity
of trade and the obligation to repay depositions funds must be fulfilled.
It is essential to bear this in mind at all time and it is the inability of
banks to see this as a guiding principle that may actually lead to failure.
In view of the above, effort has to be made to save the Nigerian commercial
banks from its current state of distress and total collapse. Thus, the
need for a study of this type.
1.2
PROBLEMS ASSOCIATED WITH THE SUBJECT MATTER
The rapid growth in the
number of commercial banks in Nigeria generated much public interest and debate
such that people advocate for either out-right ban on new entrance or the
raising of the entry conditions.
It is important to
mention that the needs of deficit economic units should prompt financial
system. And one way in which a financial system may be considered
inadequate is where financial innovation has failed to be sufficiently
responsive to the needs of deficit economic units (by making less efficient
financial facilities available to surplus economic units, either as a result of
the personal qualities of the financiers (preoccupied with short rent project)
or as a result of the conservative behaviour of financial intermediaries.
In such case, some form of government intervention might be necessary in order
to restructure the financial system and make it tend towards the optimum.
It was this line of thinking that informed government decision to liberalize
the banking sub sector. The question are what are the causes of these
failure or collapse. What are the remedies if any? These questions
are to be answered in the next chapter.
1.3
PROBLEMS THAT THE STUDY WILL BE CONCERNED WITH
In the early 1980’s was
what boom in the banking industry. There was a great increased in the
rate by which commercial banks were established in different parts of the
country.
The rapid growth in the
number of commercial banks, however, generated much public interest and debate
such that people advocated for either out-right ban on new entrance or the
raising of the entry conditions.
The commercial banks
grant ban to investors both those that are in the private and public sectors,
overdraft facilities to the customers, foreign exchange, advance and all the
other forms of credit. Commercial banks was also seen as a safety place
where one can deposit his or her money with any fear of theft; also other
valuable properties such as jewelries, well and other important documents were
deposited in commercial banks for safety purposes.
Not with standing the rapid increase, commercial banks started experiencing
some problems in the early 1990’s the primary objective of the study are:-
a)
To determine the causes of distress in Nigeria commercial banks;
b)
The strategies for avoiding further distress in the industry;
c)
Why first bank Ltd remained profitable not withstanding the distress in the
industry.
1.4
THE IMPORTANCE OF STUDY
It is an obvious fact
that finance is the main prior of development. Thus without finance,
business cannot flourish. It is a major input in any procedure process,
without it a businessman cannot survive in the country.
Many financial
institutions have been frustrated due to lack of finance.
The researcher work will
be important to the following categories of persons.
1. To
the government: This
will assist in the making of policies and guidelines as it relates to
commercial banks in Nigeria and to help in continued survival of commercial
bank.
2. To
the organization under study and financial institutions: This will
assist in helping them evaluate their survival strategies and to make
improvements where necessary.
3. To
the researcher:
It impact on her the knowledge of banking and will be of a greater use of her
in future if she is opportune to be in the industry.
4.
This will provide them with a foundation of banks survival during periods of
economic depression. This is to avoid failure if adverse external
economic environment occurs.
1.5
DEFINITION OF IMPORTANT TERMS
Distress: In
danger and needing helps suffering unhappiness rates are determined by forces
of demand and supply not by fixing regulation of government.
Demand
Deposit: Current amount deposited prior notice to the
bank.
COT (Commission On
Turnover) (Bank Charges on Account).
VAT (Value Added Tax):
Government Tax for all services rendered to any body by corporate body like
banks, hotels departmental stores etc.
Liquidity: Level of cash and short term discountable
financial instruments with a bank, a company or even individuals etc.
Withholding: A tax on interest earned on saving deposits
N50,000.00 and above.
This is decided by the
banks and remitted to government.
Deposit
Receipts: Certificate of deposits issued by a bank
acknowledging a fixed deposit by a customer.
Legitimate
income/Business:- Income legally earned or legal business.
Judgment
debt: A court ruling ordering a convict to pay a
particular amount to plaintiff.
Overdraft, Revolving
Credit/Terms
Loan: Are bank loan with various characteristics.
Prime Lending Rate
(PLR): The maximum official
lending rate allowed on bank loan by CBN.
Aggregate
lending: Total
lending
Collateral:
Security against lending
Non-Performing/Substandard
Credit: Loan, which repayment of either principal or
interest.
Perfected: Legally passed the title of document i.e
certificate of occupancy to a lender i.e. a bank as security for loan.
Bad and Doubtful
Loan: Loans which the borrower had abandoned
repayment of interest and principal.
Development Loans
Stock: Federal
government long term borrowing instrument with maturity of about five (5)
years.
Economic Stabilization
Act: An act or decree out
lining measures to address the economy or ensures stability.
“Lease
Income” Income from leasing or renting equipment.
Standing
Order: To collect or make regular payment by a bank of
behalf of its customers.
Department | Business Administration and Management |
Project ID Code | BAM0101 |
Chapters | 3 Chapters |
No of Pages | 31 pages |
Reference | YES |
Format | Microsoft Word |
Price | ₦4000, $15 |
|
|
Contact Us On | +2347043069458 |