ROLE OF BANKING SYSTEM IN THE DEVELOPMENT OF NIGERIAN ECONOMY (A Case Study of Nigerian Breweries Plc)


Content

ABSTRACT

This paper seeks to examine the Role of Banking System in the development Nigerian economy with reference to Nigerian Breweries Plc. The project work specifically looks at the role and impacts of banking sector to the Manufacturing industries.

 

The project reviewed various literature that relates to the major variables involved in the research work especially economic theories and the banking system, the Nigerian financial structure which is made up of the money market, the bond market and the equity market, the literature also examined the role of banking system to manufacturing industries and the economy of Nigeria and it finally identified the challenges faced by the Nigerian banking sector.

 

A well structured questionnaire was designed and administered to one hundred (100) staff of Nigerian Breweries Plc. The data gathered were presented on table in percentage. Three hypotheses where formulated, tested and analysed. These hypotheses were tested with the used of Chi-Square (X2) analysis. Decisions were made based on the result of the analysis.

 

Based on the results of the analyses the following conclusions are drawn;

·       Nigeria Banking System plays significant role to the growth of manufacturing industry and economic development of the Nigeria.

·       The Nigeria Banking policies promote development of manufacturing industry in Nigeria.

·       Government and Central Bank of Nigeria Policy is responsible for the ineffectiveness of the Banking Sector.

 

Afterwards recommendations were suggested to the Banking sector and manufacturing industries.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TABLE OF CONTENT

Title Page                 -          -          -          -          -          -          -          -          i

Certification            -          -          -          -          -          -          -          -          ii

Dedication   -          -          -          -          -          -          -          -          -          iii

Acknowledgement            -          -          -          -          -          -          -          iv

Abstract       -          -          -          -          -          -          -          -          -          vi

Table of Content    -          -          -          -          -          -          -          -          viii

 

CHAPTER ONE

INTRODUCTION

1.1      Background of the Study            -          -          -          -          -          1

1.2      Statement of the Problem -       -          -          -          -          -          2

1.3      Purpose of the Study                   -          -          -          -          -          3

1.4      Research Questions         -          -          -          -          -          -          4

1.5      Research Hypothesis       -          -          -          -          -          -          5

1.6      Significance of the Study -          -          -          -          -          5

1.7      Delimitation of the Study           -          -          -          -          -          6

1.8      Definition of Terms          -          -          -          -          -          -          7

 

CHAPTER TWO

LITERATURE REVIEW

2.1      Introduction           -          -          -          -          -          -          -          9

2.2      Economic Theory and the Banking System-            -          -          11

2.3      Financial Sector Depth. Liberalization and Growth-         -          13

2.4      Human Capital Formation and Financial Sector

            Development          -          -          -          -          -          -          -          14

2.5      The Financial System Structure           -          -          -          -          16

2.5.1  The Money Market           -          -          -          -          -          -          17

2.5.2  The Bond Market -           -          -          -          -          -          -          17

2.5.3  Equity Market        -          -          -          -          -          -          -          19

2.5.4  The Central Bank of Nigeria      -          -          -          -          -          19

2.6      The Role of Banking System to the Economic

            Development of the Country    -          -          -          -          -          22

2.6.1  Banks Promote Capital Formation      -          -          -          -          22

2.6.2  Investment in New Enterprises           -          -          -          -          23

2.6.3  Promotion of Trade and Industry       -          -          -          -          23

2.6.4  Development of Agriculture      -          -          -          -          -          24

2.6.5  Balanced Development of Different Regions           -          -          24

2.6.6  Influencing Economic Activity  -          -          -          -          -          24

2.6.7  Implementation of Monetary Policy   -          -          -          -          25

2.6.8  Monetization of the Economy   -          -          -          -          -          25

2.6.9  Export Promotion Cells -          -          -          -          -          -          25

2.6.10 The Risk Sharing Role of Banks          -          -          -          -          25

2.6.11 Banking Crises      -          -          -          -          -          -          -          26

2.6.12 Banks and Contagion     -          -          -          -          -          -          27

2.6.13 The Corporate Government Role of Bank- -          -          -          28

2.6.14 Relationship Banking     -          -          -          -          -          -          28

2.7      Challenges Faced by the Banking Sector       -          -          -          29

2.7.1  Problem of Information Technology -                       -          -          30

2.7.2  Human Resources -          -          -          -          -          -          -          31

2.7.3  High Rate of Fraud           -          -          -          -          -          -          32

2.7.4  Resources Mobilization -          -          -          -          -          -          32

2.7.5  Inadequate Capital Structure   -          -          -          -          -          34

2.7.6  Innovation   -          -          -          -          -          -          -          -          34

2.7.7  Non-Performance Risk Assets  -          -          -          -          -          35

2.8      Recommendations to the Challenges Faced by the

            Banking Sector                   -          -          -          -          -          -          36

            References  -          -          -          -          -          -          -          -          39

 

CHAPTER THREE

RESEARCH METHODOLOGY

3.1      Research Design    -          -          -          -          -          -          -          41

3.2      Population of the Study -          -          -          -          -          -          41

3.3      Sample Size and Sampling Technique            -          -          -          41

3.4      Research Instrument       -          -          -          -          -          -          42

3.5      Validity of the Research Instrument -            -          -          -          42

3.6      Reliability of the Research Instrument          -          -          -          42

3.7      Administration of Instrument  -          -          -          -          -          43

3.8      Method of Data Collection          -          -          -          -          -          43

3.9      Analysis of Data     -          -          -          -          -          -          -          43

 

CHAPTER FOUR

DATA PRESENTATION AND ANALYSIS

4.1      Introduction -        -          -          -          -          -          -          -          45

4.2      Personal Characteristics of the Respondent            -          -          45

4.3      Response of Respondents to the Problem Areas   -          -          48

4.4      Testing and Interpretation of the Hypothesis        -          -          56

4.4.1  Test of Hypothesis One   -          -          -          -          -          -          56

4.4.2  Test of Hypothesis Two  -          -          -          -          -          -          59

4.4.3  Test of Hypothesis Three           -          -          -          -          -          62

 

CHAPTER FIVE

SUMMARY, CONCLUSION AND RECOMMENDATION

5.0      Introduction -        -          -          -          -          -          -          -          65

5.1      Summary -  -          -          -          -          -          -          -          -          65

5.2      Conclusion  -          -          -          -          -          -          -          -          66

5.3      Recommendation  -          -          -          -          -          -          -          66

            References  -          -          -          -          -          -          -          -          68

            Appendix     -          -          -          -          -          -          -          -          70

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CHAPTER ONE

INTRODUCTION

 

1.1 BACKGROUND OF THE SYUDY

Over the last three decades, the Nigerian Banking industry witnessed tremendous changes, which has influenced the performance of the industry in terms of operational strategies and standard of operations.

A major portion of the changes result from the promulgation of Banks and other Financial Institution ACT (BOFIA) 1991 designed to regulate the operations of the financial institutions as a whole which provided more lenient terms for establishing banking and other financial institutions in the 1958 banking ordinance. As a result of the terms, number of banks starts to increase and many more investors trooped into the industry owing to the liberalization of conditions for establishing banks provided by the new decree.

As observed by Adekanye (1998), the increase in the number of financial institutions led to serious competition in the banking industry, which gradually phased out the era of “Armchair Banking Industry” in the country.

Soladoye (1997) observed that due to the growing level of competition and the rapid pace of development in the Nigerian banking industry, the apex bank must assist these banks to become more competitive as a way of increasing their strategic planning activities in a way that will provide them with a comparative advantages over others and render qualitative service at a low competitive price.

Channon (1997) in the same vein as Soladoye, in his book “Bank Strategies Management and Marketing” opined that there is a need to keep the existing customers of the bank, which should be done by satisfying their needs through the widening of the variety of services and the expansion of the market by diversifying to attract new customers.

Since the performance of a bank depends largely on the amount of transactions it carries out within a year which subsequently depend on the  market share of the bank apart from the growing need for the introduction of the universal banking in the Nigerian banking industry, prompted the CBN to approve the adoption of universal banking in the Nigerian banking industry.

The guidelines specified the rules and regulation on qualified banks and the type of business they could perform were issued by the banking supervisor Mr. O.I Imala, the CBN’s director, under the guidelines, specific activities such as clearing house functions, capital market activities as well as insurance functions can be performed by qualified banks in addition to their conventional functions. However, this research project has been designed to examine the role of banking system in the development of Nigeria economy with emphasis on the manufacturing sector of the economy.

 

1.2     STATEMENT OF THE PROBLEM

Basically in a research, there are problems that the research work tends to find solution to. In this study, the problems are state below:

Banking business was stagnant and under developed because bank managers were less innovative and concentrated mostly on the selling concepts shying away from the most important tenet banking operations, which is the marketing concept.

 

Agency problem generated between managers in the corporate headquarters and managers in the business units (branches). It arises when the owner in an organization and the agent who must performs certain actions is to implement the plans drawn up by the owners. The competitive environment of the 1980’s and 1990’s is forcing the re-appraisal of this position and the complete phase out of the “era of Arm Chair Banking” brought about increasing level of competition in the banking industry which created a new wave of development in the industry.

Collective emphases were thus shifted to the diversification of banking services and the need to make marketing strategic planning an indispensable element in banks corporate policies. If productivity must be felt, then such banks should build the required competence and stretch these competencies ahead of times. Leadership cannot be compromised as proved by the failure of banks in the west, size is not a strength, as no bank is too big to fail

 

1.3     PURPOSE OF THE STUDY

The objective of this study is to examine the role of banking system in development of the economy. However, other specific objectives include:

1.    To examine how banks are affected by public ownership and policies of financial repression.

2.    To identify the causes of the financial distress in the banking industry and the efficacy of the financial reforms.

3.    To examine the impact of banking system to employment generation.

4.    To examine the specific qualifying conditions specified by the apex banks to qualified participating banks.

5.    To evaluate the level of competition among banks and compliances with the apex bank.

6.    To evaluate the effectiveness of Nigeria banking system

7.    To examine the impact of banking system to the manufacturing industries.

 

1.4                     RESEARCH QUESTIONS

In order to achieve the purpose of this research study, the study will attempt to provide answers to the following research questions.

·       Has Banking System of Nigeria impacted on the economy of the country?

·       How is the economy of the country manifested and realized in its banking sector?

·       How can Nigeria's banking sector contribute to its economic growth given the fact that economic development issues and constraints may occur along the way?

·       What are several policies that Nigeria banking system must adopt and execute in achieving successful economic growth?

·       Does Nigeria banking system promote long- run economic growth?

·       Does Nigeria economy provide important services for bank sector growth?

·       Does Nigeria Banking System play any significant role to the growth of manufacturing industry and economic development of the Nigeria.

 

1.5     RESEARCH HYPOTHESES

Hypothesis is a tentative answer to a research question. It is a conjectural statement about the relationship that exist between two or more variables which needs to be tested empirically before they can be accepted or rejected. To provide answer to the research questions arising from this study, the following hypotheses are postulated.

 

 

Hypothesis One

Ho:      Nigeria Banking System does not play any significant role to the growth of manufacturing industry and economic development of the Nigeria.

H1:      Nigeria Banking System plays significant role to the growth of manufacturing industry and economic development of the Nigeria.

Hypothesis Two

Ho:      The Nigeria Banking policies does not promote development of manufacturing industry in Nigeria.

H1:      The Nigeria Banking policies promote development of manufacturing industry in Nigeria.

 

 

Hypothesis Three

Ho:      Government and Central Bank of Nigeria Policy is not responsible for the ineffectiveness of the Banking Sector.

H1:      Government and Central Bank of Nigeria Policy is responsible for the ineffectiveness of the Banking Sector.

 

1.6     SIGNIFICANCE OF THE STUDY

This significance of the research project is to identify the role of banking system to development of manufacturing industries.

This study also is expected to supply the relationship between the necessary requisite features to be put in place by banks and the efficiency and effectiveness of banking system to an organization like Nigerian Breweries Plc.

 

1.7     DELIMITATION OF THE STUDY

This research work is to examine the role of backing system to the development of the economy. The scope of the study is the entire banking sector to the development of manufacturing industries and the Nigeria economy in large, but due to the broad scope of the this research, the researcher is limiting the study to Nigerian Breweries Plc as representative of the entire manufacturing industry.

 

In the course of conducting this research work it is expected that the following will constitute impediments to the effective conduct of the study

a)        Time constraint within which the study must be completed.

b)        Financial constraint

c)        Inaccessible and inadequate data

d)        Also, combining project work with several other activities is another stressful task that may not allow me to cover research materials extensively.

Nevertheless, I believe the above limitations will in no way affect the reliability and validity of the research study.

 

 

1.8     DEFINITION OF TERMS

BANKING SYSTEM: a network of commercial, savings, and specialized banks that provide financial services, including accepting deposits and providing loans and credit, money transmission, and investment facilities

 

FINANCIAL CONTAGION: A situation in which a faltering economy in one country causes otherwise healthy economies in other countries to have problems

 

INTERBANK: The financial system and trading of currencies among banks and financial institutions, excluding retail investors and smaller trading parties

 

GLOBAL ECONOMY: The international spread of capitalism, especially in recent decades, across national boundaries and with minimal restrictions by governments.

 

FINANCIAL INSTITUTIONS: An organization, which may be either for-profit or non-profit, that takes money from clients and places it in any of a variety of investment vehicles for the benefit of both the client and the organization

 

LIBERALIZATION: The removal or reduction of restrictions or barriers on the free exchange of goods between nations.

 

COMMERCIAL BANK: A financial institution that provides services such as accepting deposits and giving business loans.

HUMAN CAPITAL: The set of skills which an employee acquires on the job, through training and experience, and which increase the employee's value in the marketplace.

 

MONEY MARKET: A segment of the financial market in which financial instruments with high liquidity and very short maturities are traded

 

BOND MARKET: The environment in which the issuance and trading of debt securities occurs

 

EQUITY MARKET: The market in which shares are issued and traded, either through exchanges or over-the-counter markets.

 

RELATIONSHIP BANKING: A banking philosophy that aims to establish long-term relationships with customers and reduce the customer's desire to go elsewhere for banking services.

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