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Causes And Effects Of Mismanagement In Financial Institutions

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CAUSES AND EFFECTS OF MISMANAGEMENT IN FINANCIAL INSTITUTIONS

CHAPTER ONE

INTRODUCTION

1.1            BACKGROUND OF THE STUDY

A financial institution is an organized body concerned with the management of money.  This is to say that the institution is responsible for the leading and borrowing of money in other words, it is an institution involved in financial intermediation where money is mobilized and channeled from the public sailing (those who have surplus funds want to save to those who want to invest in productive activities.  Some of the institution in Nigeria are commercial banks, stock exchange market, merchant bank, CBN insurance companies, development banker.

Mismanagement is defined by land-man English dictionary as controlled or deal with private, public or business affairs badly, unskillfully etc.  The mismanagement is also defined by Oxford English Dictionary, Version, it states that mismanagement –mismanage, bad improper administrations to manager-badly or wrongly.  Then financial mismanagement according to the above definitions may be improper administration, bad or wrongly used of money, inadequate collateral security or granting loan.  Misappropriation of money or management of finance unskillfully.  They are good in selling of securities.  They are sources of revenue to the government.  They also provide a lot of advice to the government.  They help the government extremely in international trade etc.

To the public and private individual, bank provide drastic support to public and individual affairs.  The bank grant loans advances, make payment locally or outside Nigeria.  Infact, they perform variety functions to satisfy the financial needs of all types of customers from small personal account holder to the big incorporates and public organization.  That is by accepting of deposits, safe custodying agency services etc.

Furthermore, mismanagement in financial institutions make them unable to tackle their problem and obligations like paying of taxes to the government, cash-reserve, reserve rates, workers salaries going out loans etc.

After the overthrown of the last civilian administration in the country, many financial institution made a lot of staggering discoveries to funds misappropriate through inflated contracts, bribery and kick backs etc.  Since then Nigerian economy has become a sick body up till today.  Infact financial analyst’s puts public fund misused and those smuggled outside the country at several millions of naira.

Finally, the various officers mostly the managers and cashiers of those institutions are accused of the abnormal of mismanagement in financial institutions.

 

1.2            STATEMENT OF THE PROBLEM

In this aspect it is well known fact that adequate management in the financial institutions well enable them pay their roles as supposed and achieved their basic aim or objectives as well.  They are unable to perform their roles in selling of securities paying at taxes sources or revenue to the government help in international trade etc.  Thereby encountering some problems which may be stated.

i.                    They are finding themselves unable to meet customers withdrawals

ii.                  Customer withdraw much from them thereby reducing deposit liabilities much constitutes the main source of banks, loan able funds.

iii.                Unable to abide by the relevant laws especially before the financial ordinance.

iv.               That they are having loss of trust by their customers in as much as not investing on them anymore.

v.                 That they are having poor turn-over fear.

vi.               That issue has accommodated distress in the banking system which has enraged deterioration and failure in banking of financial activities thereby revising of the gains made in the past.

 

1.3            PURPOSE/OBJECTIVE OF THE STUDY

Financial institutions have been identified as the catalyst for or meaningful economic transformation of the country.  This is no doubt that financial institutions are important sector in the economy of Nigeria financial institutions encountered a lot of financial mismanagement lending to incapacities.  These area problem that associated with the interior operators i.e. the managers, accountants, cashiers etc.

I am strongly believe that if the cause of financial mismanagement in financial institutions and its effects and set of people it affect, is identified, it will give way for easy and smoothes eradication or control in these institutions, its effect such as banks, stock exchange market, capital market etc.  So as to achieve its objectives and aims in life.  It provides machinery for which medium and long term funds are mobilized and made available to business, government and individual.  It is in video of this that I have taken up this course of study to examine thoroughly the cause of this financial mismanagement as well as its effects and the people it affected and how it affects them.

 

1.4            SIGNIFICANCE OF THE STUDY

This research work is centered in causes and effect of mismanagement in financial institution.  The significance of this research are:

1.       It will enable the research ascertain the remote and immediate problems involved in the mismanagement on financial institution.

2.       Another essence of the researcher, is that the mismanagement on financial institutions in the country and its environment and the people of Nigeria as a whole will know the problems that had been militating against the effective and efficient of mismanagement in financial institution in the respective states or country.

3.       The result of this study will inevitably lead to a decrease in the mismanagement in financial institutions.

 

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