Distress Management And Prevention Strategies For The Nigerian Banking System

ABSTRACT

       In this work the researcher worked into different ways of preventing banking distress.

       The work is divided into two chapters. Chapter one heated the permute encapsulating the general overview, statement of problem etc chapter two review related literature while chapter three handle the research methodology utilized in writing this project.

       Chapter four is concerned with the presentation and analysis of findings, while chapter five the researcher summarized her findings made recommendation and concluded her work.

       It was discovered that bank should adhere strictly to the rates of the game, the regulatory/supervisory authorities should enhance the supervisory capacity.

 

TABLE OF CONTENT

 

Title page                                                       i     

Approval page                                                        ii

Dedication                                                      iii

Acknowledgement                                            iv-v

Abstract                                                         vi

Table of content                                              vii

 

CHAPTER ONE

1.0  Introduction                                             1

1.1  General overview of study                          1

1.2  Statement of problem                                3

1.3  Objectives of the study                              3

1.4  Scope of the study                                     4

1.5  Research question                                      4

1.6  Significance of the study                            5

1.7  Limitation of study                                    6

1.8  Definition of terms                                    6

 

CHAPTER TWO

0. Literature review                                        10

2.1  Background of banking                              10

2.2  Definition of distress                                 14

2.3  Conceptual issues in distress management   18

2.4  Extent and implication of distress                21

2.5  Causes of financial sector distress               25

2.6  References                                               37

 

CHAPTER THREE

0. Research methodology                               38

3.1  Research design                                         38 

3.2  Data collection sources

      And their reliability                                     39

3.3  Research population                                  40

3.4  Sampling method                                     40

3.5  Method of data analysis                             40

3.6  Simple percentage                                    41

 

CHAPTER FOUR

0. Data presentation and analysis                   42

4.1  Data presentation                                     42

4.2  Data analysis                                            46

 

CHAPTER FIVE

0. Summary, conclusion and recommendation  49

5.1  Summary                                                49

5.2  Conclusion                                               49

5.3  Recommendation                                       50

       Bibliography                                              51

       Appendix                                                        52

       Questionnaires                                         53-54

 

CHAPTER ONE

 

0. INTRODUCTION

1.1  GENERAL OVERVIEW OF THE STUDY

       Financial sector distress is neither new nor peculiar to Nigeria. in fact, the phenomenon is almost as old as the industry. In spite of their best endeavors, financial sector distresses still occur in older banking societies like Britain, America, Spain, Indonesia and many others even all the moment (Cologun 1993 313. this assertion is the giving the fact that financial sector distress especially in banks occurred in Nigeria in the mid 50s when a total of 185 banks were reportedly established between 1947 and 1952 of which many of them failed (Nwankwo 1982 pg 47-48) the celebrated failure of Baccl-bank of credit and commerce international of U.S.A. In 1992 and the collapse of Britain’s 233 old barring bank in 1995 after a loss of $ 1billion (about N100 billion) are evidences that financial sector distress is rather new peculiar to Nigeria service.

       The last few years been both traumatic and revolutionary for the Nigeria banking industry accustomed to steady profits and little or no problems since 1959 when the CBN was established, the industry has in recent lines produced the largest number of technically insolvent and undercapitalized banks. Currently, the magnitude of distress in the nations banking industry has reached an unperceived level thereby making it an issue of concern to the government, the regulatory authorities, the banker and general public service.

       It should be noted that the banking system already in distress by the line the NDIC was established by then, about seven banks were known to be technically insolvent. The government at that time, did not embark upon a creasing exercise that would have removed the distress institution from the system because it was faired that such an action would lead to loss of public confidence and flight of foreign capital more which was no deposit insurance institution to expeditiously manage such bank.

 

1. 2. STATEMENT OF PROBLEM

       This project is entitled distress management and prevention strategies for the Nigerian banking system. The last few years, no doubt Nigerian banking industry as a result of the harsh economic environment.

       Although some level of success could be said to have been recorded in the last one of half years, especially in the area of macro economic stability, available records, however, have continued to show that the economic environment in which insured banks have been operating is very difficult one.

 

1. 3. OBJECTIVE OF THE STUDY

       It should be noted that no matter the number of banks established without effective supervisory financial control, the objective would be deflated and subsequence bank winds up.

The aim of this study is to prevent distressed bank management of Nigerian banking system. In realizing these objectives should be.

0. Adequate regulatory banking system

1.1  Change of management

1.2  Assumption of control and management

1.3  Liquidation of distressed banks

1.4  Suspension of banking license      

 

1. 4. SCOPE OF STUDY

       The study will occur a general review of the distress and management prevention strategies for the Nigerian banking system. And it will be elaborated in a way that one will understand it.

 

1.5  RESEARCH QUESTIONS

       The researchable question to be considered your research question should be measurable

1. Does poor management of a bank result to bank distress
2. Can the death of experienced and qualified personal of a bank cause use distress
3. How monetary supervision in bank works.

 

1.6.  SIGNIFICANCE OF THE STUDY

       This research is the useful for success to the student in department of banking and finance and also for banking industries in Nigerian economy. For the management of distress in the economic financial sector for promotion of maximum efficiency and full capacity utilization finance. It is therefore meant for consumption of.

1. The bankers
2. The government
3. The general public
4. Future researcher

 

 

1. 7. LIMITATION OF THE STUDY

       Some limitations I encountered is the problem of searching for a research topic and looking for the head of the department to approve the topic and the problem of finance on my on way had delayed this work to be finished in time.

       The study has another limitation which is distance transportation, the problem has become the researcher would visit some of the banks that were located far apart to interview the managers and employers.

 

 

1. 17166608125746. OF TERMS

1. 1. Distress: extreme anxiety.
2. Financial business: Is the state of suffering caused by lack of money or by necessary things of life in other words, failure due to mis-management of funds, lack of adequate capital and defective leading procedures by bank management officials.
3. Evaluation: Is the assessment to the extent of attainment of the organization objectives.
4. Effectiveness: is the determination of what extent an organization objective have been achieved.
5. Financial control: This is the effort to ensure that assets and cash are properly protected and utilized, that transaction are recorded at the appropriate terms.
6. Interest rate: Interest rate is a price of capital to a borrower and a return on capital to the saver or lender.
7. Credit ceiling: Credit ceiling are quantitative limit expressed in percentage to ensure that domestic credit expansion.
8. Stability securities: This is to stabilize the excess reserve in the banking system, thereby correcting the abnormalities in the economy.
9. Selective credit control: To ensure that more credit goes to the preferred sectors of the economy to enhance rapid development.
10. Liquidity ratios: Ensure that central bank to prescribe whenever it so desires the percentage of specified liquid assets that commercial bank must hold.
11. Open market operation (OMO): This for maintaining the monetary stability in the economy of the country.
12. Special deposit: This deposit when implemented by the bank reduces their ability to grant loan to customer thereby reducing excess liquidity in the economy.
13. Cash reserve: To reduce or increase the ability of commercial bank to give loans in their customer.
14. Variable liquid asset ratio: This a system whereby the commercial banks are required to diversify their portfolio of liquid asset holding.
15. Selective credit control: It is a procedure whereby the monetary authorities favour one sector of the economy more than the order.
16. Management: This a group of individual summing an establishment, to achieve a stated goal.
17. Scalar chain: This is the “chain of supervisor form the highest to the lowest ranks.
18. Espirit of corps: This underscores the strength in unity.
19. Coordination: This is the making of people work together in an efficient and organized way.
20. Premising: This deals with planning assumption or the future setting in which planning takes place. It is also the environment of plans in operation.