BOTH DEVELOPED AND DEVELOPING COUNTRIES AROUND THE WORLD HAVE BEEN WORRIED OVER THE EFFECT OF THE GLOBAL FINANCIAL CRISIS ON THEIR LOCAL ECONOMICS. ONE WOULD HAVE NOTICED THAT NIGERIA IS NOT EXEMPTED FROM THE CRISIS. THIS IS THE MAJOR REASON WHY THIS PROJECT WAS EMBARKED UPON TO ASCERTAIN THE EFFECTS OF THIS GLOBAL FINANCIAL CRISIS ON OUR ECONOMY BUT WITH THE BANKING SECTOR AS OUR CASE STUDY. THE PROBLEM CAUSED BY THIS GLOBAL FINANCIAL CRISIS ON OUR ECONOY AND ESPECIALLY THE BANKING SECTOR CANNOT BE OVER EMPHASIED. THE PROBLEMS TYPICALLY INCLUDE INCREASE UNEMPLOYMENT, DECREASED CONSUMER AND BUSINESS SPENDING, DECLINING STOCK PRICES, DEPRECIATION OF NAIRA AGAINST FOREIGN CURRENCIES, SHARP FALL IN THE PRICES OF SHARES AND MANY MORE. THE PURPOSE OF THIS RESEARCH IS TO EVALUATE THE EFFECT OF THIS GLOBAL FINANCIAL CRISIS ON THE BANKING SECTOR AND ECONOMY AT LARGE. FOR THE PURPOSE OF THIS, THIS RESEARCH, THE METHOD OF QUESTIONNAIRE WAS USED FOR DATA ANALYSIS WAS PERCENTAGE FORMULA AND ANY PERCENTAGE THAT IS MORE THAN FIFTY (50) PERCENT IS ACCEPTED WHILE BELOW IS NOT. THE FINDING WERE THAT THE CRISIS HAS REALLY AFFECTED THE NIGERIAN BANKS NEGATIVELY AND THE NIGERIAN STOCK EXCHANGE AS WELL, BECAUSE OF THE TREND CONTINUE, I AM AFRAID MOST OF THEM WILL GO OUT OF THE BUSINESS. RECOMMENDATION WAS ALSO GIVEN THAT THE ECONOMY SHOULD BE DIVERSIFIED AND THAT THE ACTIVITIES OF THESE BANKS SHOULD BE CHECKED TO PREVENT MISMANAGEMENT.
1.1 BACKGROUND OF THE STUDY
Without being told every one whether educated or not would have understand by now that something is terribly wrong with the economy of the nations of the world, the center in the media of every nation both national and international. The pertinent questions one may ask are, what is it all about? How did it come about? How are we affected as an individual and as a nation? How is one nation and the world responding to it? How can we find our way out of the problem caused by the crisis?
Economic meltdown is a situation where the economic activities of a nation is totally paralyzed and recessed.
According to Onuigbo (2007) economic meltdown could be called economic “go slow” just as traffic I am bring vehicle movement to a half, so does economic meltdown literally bring an economy to a stop. The resultant effects are many.
Broadly defined, a recession as a downturn in a nation economic activity. The consequences typically include increased unemployment, decreased consumer and business spending and declining stock prices.
Improvement in technology has brought the entire world into a “global-village” this is the reason for the fast spread of the current global economic meltdown across the nations of the world.
ORIGIN OF THE CURRENT GLOBAL ECONOMIC MELTDOWN
There is a wide view that the current crunch all over the world has its root from the mortgage market crisis in the united state of America (U.S.A) between 2005 and 2006, the mortgage market in the united state was highly fulled by what they refer to a “sub-prime lending” sub-prime lending is the practice of lending, mainly in the form of mortgages for the purpose of residence to borrowers who do not meet the usual criteria of borrowing unfortunately, bad debt become rampant due to borrowers inability to repay the loan, thus lead banks rite finding a possible means of reducing their leverage ratio by raising more money.
As a stock brokers found out that the bad loans the banks and other lending institutions were carrying, they pulled their money from the banks. And the markets become worse. This has since frozen the American financial system and like a wide fine spread to the four corners of the earth.
The effects of this ongoing global economic crisis on the Nigerian economy especially the banking sector cannot be over emphasized. The current situation of our economy is a wind that blows no one good, in his address to the ministers at the first federal executive council meeting in 2009, late president Yar’Adua overtly admitted that the impact of global financial meltdown had already been notice in Nigeria (internal source).
The effect has spread to Europe, Japan, Asia, Africa, Latin, America and other parts of the world. An estimated US $1.7 trillion in bail out funds has already been committed but we are yet to see the end of the tunnel not to talk of any light in it. According to a report the world stands in need of a staggering US $4 trillion to fully resolve this crisis. Both developed and developing countries around the world have been worried over the effect of the global financial crisis on their local economics.
Hence is the current situation. At present most of the revenue funds of the Nigeria comes from the oil. Nigeria sells its oil to the west and uses that money to drop its existence. Nigeria does not generate independence revenue to maintain the Nigeria economy as a result of the financial meltdown.
1.2 STATEMENT OF THE PROBLEM
From the background of the study above, it is evidence that the ongoing financial crisis has really affected our banking sector and the economy generally. Before now, the prices of oil continue to dip from a high of more than $140 per barrel mid year of 2008 to 40, which is below of what is budgeted in the year budget.
The global economic environment is changing turn oil in the global financial market is deepening into recession across the world our recent gains in economic growth and macro economic stability may be unreaged by sustained fall in oil prices.
Nigeria is a single product economy, so whether money we get as a nation is determined by the price of oil so it very clear that this is an austerity priority the implication for banking industry is that the liquidity will be greatly impacted.