ATTENTION:
BEFORE YOU READ THE CHAPTER ONE OF THE
PROJECT TOPIC BELOW, PLEASE READ THE INFORMATION BELOW.THANK YOU!
INFORMATION:
YOU CAN GET THE COMPLETE PROJECT OF THE
TOPIC BELOW. THE FULL PROJECT COSTS N5,000 ONLY. THE FULL INFORMATION ON HOW TO
PAY AND GET THE COMPLETE PROJECT IS AT THE BOTTOM OF THIS PAGE. OR YOU CAN
CALL: 08068231953, 08168759420
The Effect
Of Bank Distress On Nigeria’s Economic Growth
ABSTRACT
This study
examines Bank Distress and its effect on the economic growth of Nigeria economy
for the period of 1980 to 2009. Using the Classical Linear Regression Model the
ordinary Least Square Method (OLS) of analysis was adopted for the analysis of
the work. The result shows that the distress in the banking sector has a
significant effect on the growth of GDP in Nigeria. We recommend among others
that the government should impose strict loan administration on banks and
checkmate their activities closely to ensure that loans are properly appraised
before granted to customers. Finally, we conclude that the Federal Government
should immediately implement all the reforms necessary to make the regulatory
and supervisory bodies of the banking sectors (CBN/NDIC) more effective in
Nigeria to ensure good corporate governance, monitoring of credit risks and
inside lending, sound investment policy, overall loan surveillance and
protection from political interference among others. This will result in
efficiency and stability of the banking system and their overall support to the
Nigerian economy.
CHAPTER
ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
Banks are critically important and useful to
the economic growth and
development of every nation. This explains why
each country seeks to take
far reaching steps to forestall or to remedy
bank distress and failure. A viable
and profitable banking system provides a
formidable bulwark for economic
growth, which in turn provides a healthy
environment for banks to thrive and
be successful. According to Ehikmeaku (1998),
a well developed and stable
banking system is a sine-qua non for economic
growth and development.
In addition
to the intermediation rule, a nation’s banking system links the
domestic economy with the rest of the world by
providing the means for the
settlement of international transactions. It
has been observed that growth in
banking sector, if transmitted well, would
result to the growth of real sector
and the opposite occurs if the financial
sector is repressed and inefficient.
Banking
distress occurs when a bank experiences and is faced with illiquidity
or insolvency (Ehikmeaku(1998). The problem of
liquidity occurs when a
bank can no longer meet it’s liabilities when
due, while insolvency occurs
when the value of its realizable asset is less
than the total value of liabilities.
Both scenarios are fraught with a lot of consequences
for the depositors,
shareholders and the entire economic system.
With widespread distress that
eventually leads to bank failures, depositors
loose their lifetime savings and
shareholders loose their investments.
Furthermore, bank failures may lead to
a lossof confidence in the banking system
which is a bottleneck to the
development of banking habit among a
population to which banking business
largely appears as an alien activity. Bank
failures also results in the cutting
off of credit to enterprises desirous of such
credits for expansions and
curtailment of the numerous services that
banks provide to their clients with
adverse consequences on economic growth. Apart
from posing as a
means of
mobilizing domestic household and business sector savings for
profitable investment, a well- developed banking system
with positive
real
interest rate has great potentials to
attract foreign investments, thus
enhancing
the nation’s rapid economic
development.
Between 1989 and 2002 the incidence of
distress on Nigeria’s banking
industry worsened from 10 percent to 50
percent. The Central Bank of
Nigeria revoked the operating licenses of 35
terminally distressed banks
within that period. 4 in 1994, 2 in 1995, 26
in 1998, 2 in 2000 and 1 in 2002.
The liquidation of the banks that failed in
spite of efforts by supervisory
authorities (CBN and NDIC) to manage their
liquidity problems was
necessary in order to contain the contagious
effect of bank failure in the
economy.
A number of
banks in the economy witnessed an increased number such that
between 1986 and 1988 the number of banks
increased form 42 to 66. With
the increased competition between banks
fuelled by deregulation, fears of
banking failures increased and the federal
government of Nigeria established
the Nigeria Deposit Insurance Corporation
(NDIC) through Decree act of No.
22 of 1988. The federal government conceived
the NDIC as an institution to
act as a financial guarantee to depositors in
the event of bank failures and also
to add weight to the existing supervisory and
control capabilities of the
monetary authorities, Olaitan (1988).
The theory
underlying the relationship between banking stability and
economic growth is well known. Gurley and Shaw
(1976), among others,
observes strong evidence of a positive
correlation between real growth of
output and bank assets.
1.2 STATEMENT OF THE PROBLEM
The Nigerian
banking sector has undergone more distress and reforms than
any other sector of the Nigerian economy.
Therefore, a well functioning
banking
system promotes rapid economic growth and development. While a
banking
system that is fraught with massive failures and distress, leading to
asset
depletion, would impede economic growth and development. The
uncertainty
generated as a result of distress in banking institutions, if left
unchecked,
often raises real interest rates, creates higher cost of transaction
and disrupts
the payment mechanism with the attendant economic
consequences.
The extent
and depth of the banking distress can be of serious concern to the
relevant
supervisory/regulatory authorities when its prevalence and the
contagious effects become endemic and pose
threats to the stability of the
entire system, savings mobilization, and
financial intermediation process and
depositors confidence, Balino (1991). The
ratios of relevant variables should
have risen to a level that public confidence
in the system would be
completely eroded.
The
condition of the bank distress in Nigeria from 1980-2009 has been
attributed to a variety of causes ranging from
institutional, social, economic
and political factors. According to Ezeuduji
(1997), the real causes of distress
in individual banks lies in the way they
manage their portfolios under existing
circumstances. Poor portfolio management by
banks is viewed as the
primary cause of bank distress and failure in
Nigeria at the period under
review. While those factors that inhibited the
efficiency of portfolio
management constitute the secondary or remote
causes. According to him,
portfolio management was characterized by lax
supervision of corporate
governance among banks lending to wholesome
and unethical banking
practices by some bank chief executives
without recourse to the board of
directors, granting of huge credit facilities
without adequate securities
commensurate with such facilities. This led to
the accumulation of non-
performing loans which turned out to be bad
and doubtful debts.
1.3 OBJECTIVES OF THE STUDY
The main
objectives of this research are to ascertain the effect of bank distress
on Nigeria’s
economic growth. The specific objectives of this study are:
1. To identify the immediate causes of the
banking sector crises.
2. To identify and analyse the effects of
bank distress on Nigeria’s
economic growth.
3. To analyse the roles of monetary
authorities CBN/NDIC during the
period.
4.
To make appropriate recommendations based on the findings of the
study.
1.4 SIGNIFICANCE OF THE STUDY
The
significance of the study includes:
1. The research work will contribute
immensely to academic works, as it is
a contribution to the body of
knowledge on the effect of bank distress on
the financial system and the economy
at large. It would also aid other
researchers to carry out more studious
research on areas not covered by
this study.
2. This study will also help financial
analysts, financial consultants and
professionals alike to improve their
analytical, consulting and
operational strategies to boost their
clients’ performance in the face of
bank distress and likely
recapitalization of banks.
3. This study will also help the banking
industry by highlighting the areas
that need improvement in their
existing operations and corporate
governance and it’s impact on the
bank’s liquidity.
4. This research will also be useful to the
government (CBN, NDIC in
particular)
in enhancing it’s regulatory and supervisory roles as well as
formulation
of policies to strengthen the financial system being the
determinant
of economic stability and liability. Finally, the research will help
the
government to put in place measures to ensure good governance and risk
management
in the banking sector of the Nigerian economy.
1.5 RESEARCH HYPOTHESIS
In order to
pursue the objectives of the study, we thereby formulate the
following hypothesis.
Ho: The distress in the banking sector has no
adverse effect on the growth
of GDP in Nigeria.
Hi: The distress in the banking sector has an
adverse effect on the growth
of GDP in Nigeria.
1.6 SCOPE AND LIMITATION OF THE STUDY
For the
purpose of this study, attention is focused on the effects of bank
distress on
Nigeria’s economic growth from
1980-2009, to capture the major
bank crisis in Nigeria.
For the
limitations of this study, the major constraints of the research were
sourcing
relevant information from banks concerning bank distress and how it
has impacted
on their performance. Most of these banks were unwilling to
release such
information considered as critical to their survival and
maintaining
shareholders and public confidence.
HOW TO GET THE FULL PROJECT WORK
PLEASE, print the following instructions and information if you
will like to order/buy our complete written material(s).
HOW TO RECEIVE PROJECT MATERIAL(S)
After paying the appropriate amount (#5,000) into our bank
Account below, send the following information to
08068231953 or 08168759420
(1) Your project topics
(2) Email Address
(3) Payment Name
(4) Teller Number
We will send your material(s) after we receive bank alert
BANK ACCOUNTS
Account Name: AMUTAH DANIEL CHUKWUDI
Account Number: 0046579864
Bank: GTBank.
OR
Account Name: AMUTAH DANIEL CHUKWUDI
Account Number: 2023350498
Bank: UBA.
FOR MORE INFORMATION, CALL:
08068231953 or 08168759420
AFFILIATE LINKS:
myeasyproject.com.ng
easyprojectmaterials.com
easyprojectmaterials.net.ng
easyprojectsmaterials.net.ng
easyprojectsmaterial.net.ng
easyprojectmaterial.net.ng
projectmaterials.com.ng
googleprojectsng.blogspot.com
myprojectsng.blogspot.com.ng
https://projectmaterialsng.blogspot.com.ng/
Comments
Post a Comment