MANAGEMENT CRISIS IN BANKING INDUSTRY
(A CASE STUDY OF SOME DISTRESSED BANK)
The banking industry of the Nigerian economy is today passing through what might seem the roughest phase in its history. The wave of insolvency or distress in the sector is very unprecedented comparable only to what happened during the 1st era of bank failure in Nigeria 91953-1957) and the era of free banking (1892-1952) was such that generated under stand able apprehensive among the banking public.
Because of the prominent and sensitive role the banking industry plays in the determination of the buoyancy of any economy, its present state has agitated the government and people of Nigeria. In a bid to correct this unhealthy development the regulatory authorities ie. the central bank of Nigeria (CBN) and the Nigerian Deposit Insurance Corporation (NDIC) have devised and implemented many novel policies to check this drift. Yet the cankerworm continues to eat deeper into our banking system.
The issue of problems banks and management crisis in the banking industry has become a disturbing one in Niger.
Given the consequences of bank failure, the problems has become a major source of concern to the government the regulators of financial institution and to the general public.
Unfortunately, the problem has caught up with us gain in the Nigerian financial system. In the last ten years, sevens banks have failed some have been acquired by the central bank of Nigeria and the management of many other has been taken over by the central bank of Nigeria.
Currently, over 40 banks are adjudged technically insolvent by both the CBN and NSIC. The government of Nigeria has understandably taken stringent measure to address the situation. One of such measures is the enacted failed banks (Recovery of debts) and financial malpractices in banks decree No 18 of 1994.
The adequacy or effectiveness of these measures is yet to be completely ascertained. However, the effective resolution of the problem requires a thorough investigation of the whole issue of bank distress in Nigeria. There is the need to conduct and in-depth research into the nature, the cause, the consequences and the remedies of failing banks. This project on management crisis in the banking industry is a bold attempt to provide detailed information on the various facets of bank failure and distress in Nigeria.
It has also appraised the existing policies and regulations as well as highlighted the merits and demerits of such policies in line with check further bank failure in Nigeria. Management crisis in the banking industry has also put into proper perspective the major cause of bank insolvency and failure.
The project is thoroughly researched; it is based on copious data quoted from actual case materials on the subject. The research also presented a well-researched performance rating or analysis of the banks in Nigeria today to guide prospective investors and customers.
OMULU SEJUS .U
TABLE OF CONTENT
Table of content
1.1 Purpose Of The Study
1.2 Significance Of The Study
1.3 Research Hypothesis
1.4 Scope Of The Study
1.5 Limitation Of The Study
1.6 Definition Of Terms
2.1. The Stake Holders In The Management Of Banks
2.2. Assessments Of The Roles Of Distress And Management
2.3. Assessment Of The Performance Of External Auditors Of Banks
2.4. Exogenous Causes Of A bank Failure
2.5. Determination Of A banking Distress
2.6. Failure Resolution Efforts Prior To Liquidation
2.7. Prospects For The Resolution Of Insolvency In Nigerian Banks.
3.1 Sources Of Data
3.2 Location Of Data
3.3 Sample Size
3.4 Method Of Data Presentation And Analysis
4.1. Test Of Hypothesis
Summary Of Findings, Conclusion And Recommendation
The development of banking in Nigeria can be traced to 1891, in that year, a company known as the African Banking Corporation opened a branch office in Lagos. Incidentally, it happened that the bank was a South African organization. By January 1892, ABC acquired a License to import and distribute coins from Britain to Nigeria. In 1984, the ownership of the bank changed hands when a British out fit acquired it and its name was changed to British Bank for West Africa (BBWA). The BBWA has since changed name again to standard bank of (Nigeria) plc. A few other banks were opened after this.
The development of Banking in Nigeria can be conveniently categorized into eight (8) stages for the purpose of analysis. The stages are as follows:
1. Era of free Banking (1892-1952)
2. Era of 1st Bank failure (1953-1959)
3. Era of consolidation (first decade of independence 1960-1969).
4. Era of indigenisation (Oil boom period (1970-1979).
5. Period of depression (first stage of expansion 1980-1985).
6. Structural Adjustment programme (SAP) period (Era of deregulation –2nd stage of expansion 1986-1993)
7. Era of regulation (period of 2nd Bank failure 1994-1995).
8. Era of guided de-regulation (1995-till date).
One of the main features of the era of free banking was lack of controls or banking regulations. Al that was required was registration under the company’s ordinance. The ordinance allowed anybody or group to engage in the business of banking like any other business. This caused a scramble for banking regulations. This was caused by two major factors. There was freedom of entry between 1947 and 1952 about 185 organizations sort for banking registration, 145 were registered in 1947 and 40 in 1952. Some of these companies did not actually operate as banks due to internal problems like their inability to mobilize enough finds from shareholders and even from prospective depositors. May of them folded up no sooner than they got their registration.
The second factor is that banking was the most profitable business to do them. The result was a wide spread fraud and banking abuse. Three banks failed during the period. This became a source of concern to the then colonial government forcing it to set up the portion commission on the 7th September 1948 to enquire into the operation of general banking business and recommend the extent of control. Four years later, in 1952 the first banking ordinance or registration was enacted.
The enacted of the bank ordinance resulted in new banks finding it difficult to get registered and do business. On the other hand, the existing banks which could not fulfill the requirement of the ordinance were forced to close shop resulting into a series of bank failure. The ordinance stipulated some conditions for the operation of banking business many banks could not satisfy these conditions and this caused a mass failure of banks and collapse of the prevailing business. In all nineteen banks failed during this period out of a total of 29 banks.
1.1 PURPOSE OF THE STUDY
The principal purpose of this research work is to highlight the need and measure for achieving a sustained viability of the banking industry. Through critical appraisal of the presented political and economics environment under which the system (banking) operates.