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BANK CAPITAL ADEQUACY AND ECONOMY DEVELOPMENT (A STUDY OF NIGERIA)
The study examines bank capital adequacy and economy development in Nigeria. The objective of the study is to find out the reason for the review of capital base of commercial banks in Nigeria and to find out the determinants of bank’s capital adequacy. In this study, personal interview, questionnaire, internet and textbook were employed in the collection of data. Data collected were presented in tables and percentages form. Percentage methods were used to analyze data collected while the chi-square statistical model was used to test for the hypothesis formulated. The study revealed that new capitalization rate will increase the output capacity in Nigeria. Based on the findings, the study recommended that the Federal Government should give a strong competition to the commercial banks on the issue of moving the nation forward. This they can do by way of giving out loans to people at a very reasonable rate of interest through any of the designated development bank.
TABLE OF CONTENTS
Title Page i
Table of Contents vi
Chapter One: Introduction 1
1.1 Background to the Study 1
1.2 Statement of Problem 2
1.3 Research Questions 2
1.4 Objectives of the Study 2
1.5 Statement of Hypotheses 3
1.6 Significance of the Study 3
1.7 Scope of the Study 4
1.8 Limitations of the Study 4
1.9 Definitions of Terms 5
Chapter Two: Review of Related Literature 6
2.1 Introduction 7
2.2 Historical Development of Commercial Banking in Nigeria 7
2.3 What is a Bank? 7
2.4 Commercial Banking 8
2.5 Functions of Commercial Bank 9
2.6 Bank Capital and Economic Development 12
2.7 The Researcher’s Perspective of the N25BN Capitalization Base 15
Chapter Three: Research Method and Design 18
3.1 Introduction 18
3.2 Research Design 18
3.3 Description of Population of the Study 18
3.4 Sample Size 19
3.5 Sampling Technique 19
3.6 Sources of Data Collection 19
3.7 Method of Data Presentation 19
3.8 Method of Data Analysis 20
Chapter Four: Data Presentation, Analysis and Interpretation 21
4.1 Introduction 21
4.2 Presentation of Data 21
4.3 Data Analysis 21
4.4 Hypothesis Testing 34
Chapter Five: Summary of Findings, Conclusion and Recommendations 40
5.1 Introduction 40
5.2 Summary of Findings 40
5.3 Conclusion 41
5.4 Recommendations 42
Appendix I 46
Appendix II 47
1.1 Background to the Study
The downturn in the nation’s economy ever since termination of the Republic in 1984 and coming of the military thereafter is no longer news. Series of efforts by the various government whether sincere of insincere towards improving the betterment of the economy are also appreciated. Of importance to any economy is the financial market which comprises of both Capital Market and Money Market of lich commercial bank is an integral part. Ever since the establishment of the first commercial bank more than a century ago, the industry has witnessed a lot of topsy-turvy depending on government policies and regulations. Years before introduction of structural adjustment program (SAP) in 1986, there were few banks working in a regulated environment and with the coming of SAP the whole economy became porous courtesy of the regulation syndrome occasioned by preaching and teaching of SAP. What became the order of the day were the proliferation of banks and other financial institution. The banking sector was so bastardized that every nook and corner there sprang up banks. What is witnessed today is that these banks are in form of distress, which is now history.
1.2 Statement of Problem
The importance of bank capital adequacy in a country cannot be over emphasized. Commercial banks are supposed to be one of the agents by which the nation’s economy could be rejuvenated (make more lively or useful). But from the angle of the new Governor of the Central Bank of Nigeria, the banks rather than being an agent of boom to the nation have been agent of doom. They refuse to pay the economy, but rather inflict pain on the economy. They are supposed to play in the achievement of macroeconomic objective of maintaining price stability and reduction of unemployment in the economy.
1.3 Research Questions
1. What are the sources and uses of banks’ funds?
2. What is bank’s capital adequacy?
3. What are determinants of bank’s capital adequacy?
4. How are the roles of bank supervision and examination adequately being carried out in Nigeria?
5. What are the reasons for the review of the capital base of commercial banks in Nigeria from N2hn in May 2004 to N25bn in June of the same year?
1.4 Objectives of the Study
1. To highlight the sources and uses of bank’s funds
2. To find out bank’s capital adequacy
3. To find out the determinants of bank’s capital adequacy
4. To find out how roles of bank supervision and examination adequacy being carried out in Nigeria.
5. To find out the reason for the review of capital base of commercial banks in Nigeria.
1.5 Statement of Hypotheses
Ho: Inadequate bank capital base is not one of the economic developments.
HI: Inadequate bank capital base is one of the economic developments.
N25bn capital base will not make Nigerian commercial banks to be active to their responsibilities as one of the key agents needed to achieve more economic objectives.
N25bn capital base will make Nigerian Commercial Banks to be active to their responsibilities as one of the key agents needed to achieve more economic objectives.
1.6 Significance of the Study
It is hope that this study will be of benefit to the government, commercial banks and the society at large to know there responsibilities in bank adequacy and economy development.
1.7 Scope of the Study
The project work covers bank capital adequacy and economy development in Nigeria and effort will be made to study the contribution of the commercial banks to the national economy growth and development.
1.8 Limitations of the Study
It must be acknowledged that an error proof research work is hard to come by. Most especially that the basis for academic research is to find out about such errors with a view of correcting them or improving of such work. Therefore it is expected that this research work might not be an exception.
i. The scope of the study is wide and there s likelihood that justice might be done to all the years under the period.
ii. Secondly, the variables that constitute basis for economic development is numerous and such the research might he limited to those that the bank capital has direct effect on.
iii. There may be unavailability of data for some part of the period under consideration.
iv. Another limiting factor might be financial constraint as well as time constraint. However, attempt will be made to bring these problems to the barest minimum.
1.9 Definition of Terms
Bank: A place where one can store, deposit, stock, money
and valuable documents for further usage.
Capital: Assets, fund, wealth, principal investments of a nation’s resources
Adequacy: Sufficient fund that satisfies the need of an economy.
Economy: The financial system of a nation resource
Capital market: The money base of the nation, where sales of stock and security is traded
Money Market: Trading of currency
Commercial Bank: Store house solemnly for the purpose of profit making.
Inadequate: Insufficiency of fund in a nation, or too little fund in circulation to meet a nation’s needs.